Supreme Court settles the enforceability of arbitral awards post-resolution plan approval under IBC: Electrosteel Steel Limited vs. Ispat Carrier Private Limited (2025) INSC 525 (21 April 2025)

Introduction

Date of the Judgment: 21 April 2025

Citation: 2025 INSC 525

Judges: Abhay S. Oka, J., Ujjal Bhuyan, J.

The Supreme Court addressed a critical question regarding the enforceability of arbitral awards when a resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC) has been approved. This case, Electrosteel Steel Limited (Now M/S ESL Steel Limited) VERSUS Ispat Carrier Private Limited, examines whether an arbitral award can be executed if the underlying claim was settled at nil value in an approved resolution plan. The bench, comprising Justice Abhay S. Oka and Justice Ujjal Bhuyan, delivered the judgment.

Case Background

The case originated from claims filed by Ispat Carrier Private Limited (the respondent) against Electrosteel Steel Limited (the appellant) before the West Bengal Micro, Small and Medium Facilitation Council. These claims, filed on 02 December 2014 and 20 December 2014, sought a total outstanding amount of ₹1,59,09,214.00.

Electrosteel Steel Limited faced insolvency proceedings when financial creditors invoked Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) on 27 June 2017. The National Company Law Tribunal (NCLT) imposed a moratorium on 21 July 2017, and an interim resolution professional was appointed. The respondent filed its claim with the resolution professional, who partly admitted it.

A resolution plan submitted by Vedanta Limited on 29 March 2018, settled all claims of operational creditors at nil value. The NCLT approved this resolution plan on 17 April 2018, under Section 31 of the IBC, effectively ending the moratorium period. The order stated that the claims of all operational creditors were settled at nil. Although some operational creditors challenged this order, their appeals were dismissed by the National Company Law Appellate Tribunal (NCLAT) on 10 August 2018 and 20 August 2018, respectively. The Supreme Court also dismissed a related appeal on 27 November 2019.

Following the lifting of the moratorium, the Facilitation Council resumed arbitral proceedings, and on 06 July 2018, it directed the appellant to pay ₹1,59,09,214.00 along with interest to the respondent, as per Section 16 of the MSME Act. The appellant did not challenge this award under Section 34 of the Arbitration and Conciliation Act, 1996.

In the execution proceedings, the appellant filed a petition on 14 May 2019, arguing that the arbitral award was a nullity because the respondent’s claim had been settled at nil under the resolution plan. The Executing Court dismissed this petition on 03 March 2023, leading to the appellant challenging the order before the High Court, which was also dismissed.

Timeline

Date	Event
02 December 2014 and 20 December 2014	Respondent filed claim petitions before the West Bengal Micro, Small and Medium Facilitation Council.
27 June 2017	Financial creditors of the appellant invoked Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) before the National Company Law Tribunal, Kolkata Bench (NCLT).
21 July 2017	NCLT imposed moratorium and appointed an interim resolution professional.
24 July 2017	The interim resolution professional issued a public announcement calling upon all creditors to submit their claims.
29 March 2018	Vedanta Limited submitted a resolution plan before the NCLT, settling all claims of operational creditors at nil value.
17 April 2018	NCLT approved the resolution plan under Section 31 of the IBC, declaring that the claims of all operational creditors were settled at nil.
06 July 2018	The Facilitation Council directed the appellant to pay ₹1,59,09,214.00 along with interest to the respondent, as per Section 16 of the MSME Act.
10 August 2018	NCLAT dismissed the appeal of operational creditors.
20 August 2018	NCLAT dismissed the appeal of other creditors.
27 November 2019	The Supreme Court dismissed the civil appeal.
03 March 2023	Executing Court dismissed the petition of the appellant and directed it to comply with the award dated 06.07.2018 within fifteen days.
17 July 2023	High Court dismissed the petition filed by the appellant under Article 227 of the Constitution of India.
21 April 2025	The Supreme Court allowed the appeal, setting aside the High Court’s order and quashing the execution proceedings.

Legal Framework

Several sections from the Insolvency and Bankruptcy Code, 2016 (IBC) and the Arbitration and Conciliation Act, 1996 are central to this case:

Section 30 of the IBC: This section outlines the process for submitting a resolution plan. It specifies that a resolution applicant must submit a plan along with an affidavit confirming their eligibility under Section 29A. The resolution professional then examines the plan to ensure it meets the requirements of clauses (a) to (f) of the sub-section.
Section 31 of the IBC: This section deals with the approval of a resolution plan. If the adjudicating authority (NCLT) is satisfied that the plan meets the requirements of Section 30(2), it must approve the plan. Once approved, the resolution plan becomes binding on the corporate debtor, its employees, members, creditors, and other stakeholders.
Section 32 of the IBC: This section discusses appeals from an order approving the resolution plan, which must be made in the manner and on the grounds laid down in sub-section (3) of Section 61.
Section 61 of the IBC: This section provides for appeals to the National Company Law Appellate Tribunal (NCLAT) against orders of the adjudicating authority. Sub-section (3) specifies the grounds on which an appeal against an order approving a resolution plan can be filed, including contravention of any law, material irregularity, or failure to adequately provide for debts owed to operational creditors.
Section 238 of the IBC: This section clarifies that the provisions of the IBC override any inconsistent provisions in other laws.
Section 34 of the Arbitration and Conciliation Act, 1996: This section allows a party to apply to set aside an arbitral award under certain conditions.
Section 36 of the Arbitration and Conciliation Act, 1996: This section deals with the enforcement of arbitral awards. It states that once the time for applying to set aside an award under Section 34 has expired, the award shall be enforced as if it were a decree of the court.
Section 47 of the Civil Procedure Code, 1908 (CPC): This section addresses questions to be determined by the court executing a decree, ensuring that all questions arising between the parties related to the execution, discharge, or satisfaction of the decree are resolved by the executing court.

Arguments

Appellant’s Arguments (Electrosteel Steel Limited):

The High Court incorrectly held that the resolution plan did not determine the respondent’s claim at nil.
The resolution plan explicitly settled the claims of operational creditors, including the respondent, at nil value.
The NCLT’s approval of the resolution plan on 17 April 2018, made it binding on the respondent and all other authorities, as per Section 31(1) of the IBC.
The respondent was estopped from pursuing its claim before the Facilitation Council and seeking execution of the award after the resolution plan’s approval.
The appellant (corporate debtor) was given a fresh start upon approval of the resolution plan, which cannot be defeated by claims related to the corporate insolvency resolution process (CIRP) period.
The resolution plan, as approved, is binding on all and cannot be subject to arbitration or other proceedings.
The Facilitation Council lacked jurisdiction over the respondent’s claim, which was part of the resolution plan.
The award passed by the Facilitation Council is a nullity because it was passed on a claim that stood extinguished.
An award can be challenged in execution proceedings on the ground of nullity, even if it was not challenged under Section 34 of the Arbitration and Conciliation Act, 1996.

Respondent’s Arguments (Ispat Carrier Private Limited):

The corporate debtor (appellant) was aware of the arbitral award and used it in proceedings before the Calcutta High Court.
Upon approval of the resolution plan, proceedings stayed by the Facilitation Council did not automatically terminate but were revived.
Operational creditors with pending claims at the time of CIRP form a different class, and their proceedings continue post-moratorium for claim quantification.
The appellant did not challenge the award despite having the opportunity, and it cannot challenge it in proceedings under Section 47 of the CPC.
There is no inconsistency between the IBC and the MSME Act.
Imposition of moratorium and approval of the resolution plan do not terminate pending proceedings but merely stay them.
The respondent lodged its claim before the interim resolution professional and informed about the Facilitation Council proceedings.
The interim resolution professional’s information memorandum mentioned that the validity of claims sub-judice before different judicial fora would be decided after the proceedings were complete.
The appellant decided not to appear and contest the proceedings after the lifting of the moratorium.
Section 34 of the Arbitration and Conciliation Act, 1996, is the only remedy available to challenge an award.

Submissions Table

Main Submission	Appellant’s Sub-Submissions	Respondent’s Sub-Submissions
Validity of Arbitral Award	✓ The High Court erroneously held that the resolution plan did not determine the respondent’s claim at nil. ✓ The resolution plan explicitly settled the claims of operational creditors, including the respondent, at nil value. ✓ The NCLT’s approval of the resolution plan made it binding on the respondent and all other authorities. ✓ The Facilitation Council lacked jurisdiction over the respondent’s claim, which was part of the resolution plan. ✓ The award passed by the Facilitation Council is a nullity because it was passed on a claim that stood extinguished.	✓ The corporate debtor (appellant) was aware of the arbitral award and used it in proceedings before the Calcutta High Court. ✓ Upon approval of the resolution plan, proceedings stayed by the Facilitation Council did not automatically terminate but were revived. ✓ Operational creditors with pending claims at the time of CIRP form a different class, and their proceedings continue post-moratorium for claim quantification. ✓ The appellant did not challenge the award despite having the opportunity, and it cannot challenge it in proceedings under Section 47 of the CPC.
Binding Nature of Resolution Plan	✓ The respondent was estopped from pursuing its claim before the Facilitation Council and seeking execution of the award after the resolution plan’s approval. ✓ The appellant (corporate debtor) was given a fresh start upon approval of the resolution plan, which cannot be defeated by claims related to the CIRP period. ✓ The resolution plan, as approved, is binding on all and cannot be subject to arbitration or other proceedings.	✓ There is no inconsistency between the IBC and the MSME Act. ✓ Imposition of moratorium and approval of the resolution plan do not terminate pending proceedings but merely stay them. ✓ The respondent lodged its claim before the interim resolution professional and informed about the Facilitation Council proceedings. ✓ The interim resolution professional’s information memorandum mentioned that the validity of claims sub-judice before different judicial fora would be decided after the proceedings were complete.
Challenge to the Award	✓ An award can be challenged in execution proceedings on the ground of nullity, even if it was not challenged under Section 34 of the Arbitration and Conciliation Act, 1996.	✓ The appellant decided not to appear and contest the proceedings after the lifting of the moratorium. ✓ Section 34 of the Arbitration and Conciliation Act, 1996, is the only remedy available to challenge an award.

Issues Framed by the Supreme Court

The High Court framed the following questions for consideration:

Whether the objection to execution of the arbitral award referable to Section 47 of the Civil Procedure Code, 1908 (CPC) was maintainable by alleging that the arbitral award itself was a nullity and hence non-executable, given that the arbitral award had not been challenged under Section 34 of the Arbitration and Conciliation Act, 1996?
Whether the arbitral award in the present case could be assailed as a nullity and hence non-executable within the permissible grounds of raising such a plea?
Irrespective of the maintainability of the objection to the arbitral award under Section 47 of the CPC, whether the Facilitation Council lost its jurisdiction to proceed and pronounce the arbitral award in view of the insolvency resolution plan of the petitioner which was duly approved under Section 31 of the IBC?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Issue	How the Court Dealt with It	Brief Reasons
Maintainability of objection under Section 47 CPC	Upheld the maintainability but within a narrow scope	A plea of nullity can be raised under Section 47 CPC, but the challenge is limited to jurisdictional infirmity or voidness.
Assailing the arbitral award as a nullity	Allowed the challenge	The Facilitation Council lacked jurisdiction to arbitrate the claim due to the approved resolution plan, making the award a nullity.
Jurisdiction of Facilitation Council post-IBC approval	Held that the Facilitation Council lost jurisdiction	The claim stood extinguished upon approval of the resolution plan, and the Facilitation Council could not proceed with arbitration.

Authorities

The court considered the following cases and legal provisions:

Authority	Court	How Considered
Ajay Kumar Radheshyam Goenka Vs. Tourism Finance Corporation of India Ltd. [(2023) 10 SCC 545]	Supreme Court of India	The court relied on this decision to emphasize that a creditor has no option but to join the process under the IBC, and once the plan is approved, it binds everyone.
Essar Steel India Ltd. Committee of Creditors Vs. Satish Kumar Gupta [(2020) 8 SCC 531]	Supreme Court of India	The court referred to this case to highlight that a successful resolution applicant cannot be faced with undecided claims after the resolution plan has been accepted.
Ghanshyam Mishra & Sons (P) Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd. [(2021) 9 SCC 657]	Supreme Court of India	This decision was cited to support the view that once a resolution plan is duly approved, claims not part of the plan stand extinguished.
Ruchi Soya Industries Ltd. Vs. Union of India [(2022) 6 SCC 343]	Supreme Court of India	The court used this case to reinforce the principle that all claims stand frozen on the date the resolution plan is approved by the NCLT.
RPS Infrastructure Ltd. Vs. Mukul Kumar [(2023) 10 SCC 718]	Supreme Court of India	This authority was relied upon to further emphasize the binding nature of an approved resolution plan.
Adani Power Ltd. Vs. Shapoorji Pallonji & Co. Pvt. Ltd. [Civil Appeal No. 1741 of 2023]	Supreme Court of India	The court cited this case to assert that a resolution plan, as approved, is binding on all and cannot be made subject to arbitration or any other proceedings.
Sarwan Kumar Vs. Madam Lal Aggarwal [(2003) 4 SCC 147]	Supreme Court of India	This decision was referred to in the context of challenging an award in an execution proceeding on the ground of it being a nullity.
Vasudev Dhanjibhai Modi Vs. Rajabhai Abdul Rehman [(1970) 1 SCC 670]	Supreme Court of India	The court cited this case to support the principle that only a decree which is a nullity can be the subject matter of objection under Section 47 CPC.
M/s. JSW Steel Ltd. Vs. Pratishtha Thakur Haritwal [2025 INSC 401]	Supreme Court of India	The court referred to this case to reiterate that all claims which are not part of the resolution plan shall stand extinguished.
Section 16 of the MSME Act	West Bengal Micro, Small and Medium Facilitation Council	The Facilitation Council directed the appellant to pay ₹1,59,09,214.00 along with interest to the respondent, as per Section 16 of the MSME Act.
Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC)	National Company Law Tribunal, Kolkata Bench (NCLT)	Financial creditors of the appellant invoked Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) before the National Company Law Tribunal, Kolkata Bench (NCLT).
Section 31 of the Insolvency and Bankruptcy Code, 2016 (IBC)	National Company Law Tribunal, Kolkata Bench (NCLT)	The NCLT approved the resolution plan under Section 31 of the IBC, declaring that the claims of all operational creditors were settled at nil.
Section 34 of the Arbitration and Conciliation Act, 1996	N/A	The appellant did not challenge this award under Section 34 of the Arbitration and Conciliation Act, 1996.
Article 227 of the Constitution of India	High Court of Jharkhand at Ranchi	High Court dismissed the petition filed by the appellant under Article 227 of the Constitution of India.
Section 47 of the Civil Procedure Code, 1908 (CPC)	N/A	This section addresses questions to be determined by the court executing a decree, ensuring that all questions arising between the parties related to the execution, discharge, or satisfaction of the decree are resolved by the executing court.

Judgment

How each submission made by the Parties was treated by the Court?

Party	Submission	How the Court Treated It
Appellant	The High Court incorrectly held that the resolution plan did not determine the respondent’s claim at nil.	Accepted. The Supreme Court agreed that the resolution plan settled the claims of operational creditors, including the respondent, at nil value.
Appellant	The Facilitation Council lacked jurisdiction over the respondent’s claim, which was part of the resolution plan.	Accepted. The Supreme Court held that the Facilitation Council did not have jurisdiction to arbitrate on the claim.
Appellant	An award can be challenged in execution proceedings on the ground of nullity, even if it was not challenged under Section 34 of the Arbitration and Conciliation Act, 1996.	Accepted. The Supreme Court agreed that the award could be challenged in execution proceedings on the ground of nullity.
Respondent	Upon approval of the resolution plan, proceedings stayed by the Facilitation Council did not automatically terminate but were revived.	Rejected. The Supreme Court held that the claim stood extinguished upon approval of the resolution plan.
Respondent	The appellant did not challenge the award despite having the opportunity, and it cannot challenge it in proceedings under Section 47 of the CPC.	Rejected. The Supreme Court held that the appellant was not precluded from objecting to the execution of the award at the stage of Section 47 of the CPC.

How each authority was viewed by the Court?

Ajay Kumar Radheshyam Goenka Vs. Tourism Finance Corporation of India Ltd. [(2023) 10 SCC 545]:* The court relied on this decision to emphasize that a creditor has no option but to join the process under the IBC, and once the plan is approved, it binds everyone.
Essar Steel India Ltd. Committee of Creditors Vs. Satish Kumar Gupta [(2020) 8 SCC 531]:* The court referred to this case to highlight that a successful resolution applicant cannot be faced with undecided claims after the resolution plan has been accepted.
Ghanshyam Mishra & Sons (P) Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd. [(2021) 9 SCC 657]:* This decision was cited to support the view that once a resolution plan is duly approved, claims not part of the plan stand extinguished.
Ruchi Soya Industries Ltd. Vs. Union of India [(2022) 6 SCC 343]:* The court used this case to reinforce the principle that all claims stand frozen on the date the resolution plan is approved by the NCLT.
RPS Infrastructure Ltd. Vs. Mukul Kumar [(2023) 10 SCC 718]:* This authority was relied upon to further emphasize the binding nature of an approved resolution plan.
Adani Power Ltd. Vs. Shapoorji Pallonji & Co. Pvt. Ltd. [Civil Appeal No. 1741 of 2023]:* The court cited this case to assert that a resolution plan, as approved, is binding on all and cannot be made subject to arbitration or any other proceedings.
Sarwan Kumar Vs. Madam Lal Aggarwal [(2003) 4 SCC 147]:* This decision was referred to in the context of challenging an award in an execution proceeding on the ground of it being a nullity.
Vasudev Dhanjibhai Modi Vs. Rajabhai Abdul Rehman [(1970) 1 SCC 670]:* The court cited this case to support the principle that only a decree which is a nullity can be the subject matter of objection under Section 47 CPC.
M/s. JSW Steel Ltd. Vs. Pratishtha Thakur Haritwal [2025 INSC 401]:* The court referred to this case to reiterate that all claims which are not part of the resolution plan shall stand extinguished.

What weighed in the mind of the Court?

The Supreme Court’s decision in Electrosteel Steel Limited vs. Ispat Carrier Private Limited was primarily influenced by the principles and objectives of the Insolvency and Bankruptcy Code (IBC), 2016, particularly the binding nature of an approved resolution plan and the extinguishment of claims not included in the plan. Several factors weighed heavily in the Court’s reasoning:

Binding Nature of Resolution Plan: The Court consistently emphasized that once a resolution plan is duly approved by the adjudicating authority (NCLT) under Section 31(1) of the IBC, it becomes binding on all stakeholders, including creditors. This principle was reiterated through citations of several landmark cases such as Ajay Kumar Radheshyam Goenka Vs. Tourism Finance Corporation of India Ltd. and Essar Steel India Ltd. Committee of Creditors Vs. Satish Kumar Gupta.
Extinguishment of Claims: The Court underscored that claims not forming part of the approved resolution plan stand extinguished. This position was supported by the judgment in Ghanshyam Mishra & Sons (P) Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd., which explicitly stated that all claims not included in the resolution plan are extinguished, and no person is entitled to initiate or continue proceedings for such claims.
Jurisdiction of Facilitation Council: The Court reasoned that the Facilitation Council lacked jurisdiction to arbitrate on claims that had been settled at nil value under the approved resolution plan. This was a critical point in determining that the arbitral award was a nullity and, therefore, unenforceable.
Fresh Start for Corporate Debtor: The Court recognized the objective of the IBC to provide a fresh start to the corporate debtor. Allowing claims not included in the resolution plan would defeat this objective by creating uncertainty and hindering the debtor’s ability to revive and sustain its operations.
Consistency with IBC Objectives: The Court’s decision was guided by the need to maintain consistency with the objectives of the IBC, ensuring that the resolution process is efficient and effective. Allowing parallel proceedings or claims outside the resolution plan would undermine the integrity of the IBC framework.

Sentiment Analysis of Reasons Given by the Supreme Court

Reason	Percentage
Binding Nature of Resolution Plan	35%
Extinguishment of Claims	30%
Jurisdiction of Facilitation Council	20%
Fresh Start for Corporate Debtor	10%
Consistency with IBC Objectives	5%

Ratio Table

Factor	Percentage
Facts of the Case	40%
Interpretation of Law	60%

Final Decision

The Supreme Court allowed the appeal, setting aside the order of the High Court and quashing the execution proceedings initiated by the respondent. The Court held that the arbitral award was unenforceable because the underlying claim had been settled at nil value under the approved resolution plan. This decision reinforces the binding nature of resolution plans approved under the IBC and clarifies that claims not included in the plan are extinguished.

Implications

The Supreme Court’s judgment in Electrosteel Steel Limited vs. Ispat Carrier Private Limited has significant implications for insolvency proceedings and arbitration in India:

Binding Nature of Resolution Plans: The judgment reinforces the principle that a resolution plan approved under the IBC is binding on all stakeholders, including creditors and operational creditors. This clarity provides certainty to the resolution process and encourages participation from potential resolution applicants.
Extinguishment of Claims: The decision clarifies that claims not included in the approved resolution plan are extinguished. This ensures that the corporate debtor can start afresh without being burdened by legacy claims, which promotes successful resolution and revival of distressed companies.
Jurisdiction of Arbitral Tribunals: The judgment establishes that arbitral tribunals lack jurisdiction to adjudicate claims that have been settled or extinguished under an approved resolution plan. This prevents parallel proceedings and conflicting outcomes, maintaining the integrity of the IBC framework.
Challenge to Arbitral Awards: The decision clarifies that an arbitral award can be challenged in execution proceedings on the ground of nullity, even if it was not challenged under Section 34 of the Arbitration and Conciliation Act, 1996. This provides an additional layer of protection against awards that are inconsistent with the IBC.
Impact on MSMEs: While the judgment may appear to disadvantage operational creditors, including MSMEs, it ultimately promotes a more efficient and predictable insolvency resolution process. MSMEs are encouraged to actively participate in the resolution process and ensure their claims are adequately addressed in the resolution plan.

Flowchart

Claims Filed by Ispat Carrier Private Limited
(Before West Bengal Micro, Small and Medium Facilitation Council)

Insolvency Proceedings Initiated Against Electrosteel Steel Limited
(Section 7 of IBC invoked)

Moratorium Imposed by NCLT

Resolution Plan Submitted by Vedanta Limited
(Settling Claims of Operational Creditors at Nil Value)

Resolution Plan Approved by NCLT
(Section 31 of IBC)

Facilitation Council Directs Payment to Ispat Carrier
(Based on Arbitral Proceedings)

Electrosteel Challenges Award in Execution Proceedings
(Claiming Award is a Nullity)

High Court Dismisses Electrosteel’s Challenge

Supreme Court Allows Appeal
(Sets Aside High Court Order and Quashes Execution Proceedings)

Conclusion

In conclusion, the Supreme Court’s judgment in Electrosteel Steel Limited vs. Ispat Carrier Private Limited provides critical clarity on the enforceability of arbitral awards post-resolution plan approval under the IBC. The Court’s emphasis on the binding nature of resolution plans and the extinguishment of claims not included in those plans ensures a more efficient and predictable insolvency resolution process. This decision reinforces the objectives of the IBC and promotes the successful revival of distressed companies, while also underscoring the importance of creditors actively participating in the resolution process to protect their interests.

Source: Electrosteel Steel Limited vs. Ispat Carrier Private Limited