Introduction:
In a significant judgment impacting insolvency and arbitration jurisprudence, the Delhi High Court, through Justice Jyoti Singh, held that any claims which are not part of a resolution plan approved under the Insolvency and Bankruptcy Code, 2016 (“IBC”) stand extinguished and are non-arbitrable. The case, titled JSW Ispat Special Products Limited v Bharat Petroresources Limited (O.M.P. (COMM) 533/2024 & I.As. 47736/2024, 4327/2025, 4328/2025 and 8551/2025), was decided on 11 September 2025. The dispute arose from an arbitral award dated 21 August 2024, which had entertained claims of the respondent even though they were not included in the resolution plan approved by the Committee of Creditors (CoC) and later sanctioned by the National Company Law Tribunal (NCLT). The petitioner, admitted to Corporate Insolvency Resolution Process (CIRP), challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 (“ACA”), arguing that post-insolvency commencement date (ICD) claims not forming part of the resolution plan cannot be sustained. The High Court examined issues of arbitrator disclosures, potential bias, and most importantly, the arbitrability of post-resolution plan claims, before ruling in favor of the petitioner and setting aside the arbitral award.
Arguments of the Petitioner:
The petitioner’s counsel, Senior Advocate Dayan Krishnan, argued that the arbitral proceedings were vitiated both procedurally and substantively. On the procedural aspect, it was contended that the arbitral tribunal failed to comply with the mandatory disclosure requirements under Section 12(1) and (2) of the ACA, read with the Sixth Schedule. Instead of submitting individual written disclosures, the tribunal issued a composite procedural order declaring that no member had any conflict of interest. The petitioner emphasized that this violated the statutory mandate of providing written disclosures in the prescribed format, which is crucial to ensure transparency and independence in arbitral proceedings. More significantly, it was pointed out that the presiding arbitrator, in his earlier capacity as Chairperson of the NCLAT, had adjudicated upon an appeal filed by the respondent challenging the NCLT’s approval of the resolution plan on 19 August 2019. Since the subject matter of the appeal overlapped with issues in arbitration, the petitioner claimed that the presiding arbitrator’s failure to disclose this amounted to bias and a conflict of interest, rendering him ineligible under the law.
On the merits of the dispute, the petitioner argued that the arbitral tribunal had exceeded its jurisdiction in entertaining and awarding claims that were extinguished under IBC. It was submitted that once a resolution plan is approved by the CoC and sanctioned by the NCLT under Section 31 of the IBC, it becomes binding on all stakeholders, including operational creditors. Section 31, read with Section 238, provides that all claims not incorporated in the resolution plan stand extinguished, whether present or future, known or unknown, accrued or contingent. Relying heavily on the Supreme Court’s judgment in Ghanashyam Mishra and Sons Private Limited v Edelweiss Asset Reconstruction Company Limited (2021) 227 Comp Cas 251 (SC), the petitioner argued that permitting post-plan claims to be raised in arbitration would nullify the IBC framework, defeat the principle of revival of corporate debtors, and reopen settled liabilities. In this case, the respondent had filed proofs of claim under Regulation 7 of the CIRP Regulations — Rs. 9.58 crore as operational dues up to the ICD and Rs. 9.92 crore as estimated future expenditure post-ICD. While the first claim was addressed in the resolution plan, the second claim was not included. The petitioner stressed that the respondent’s failure to have the latter claim incorporated meant it was extinguished, leaving no scope for arbitral adjudication.
The petitioner also emphasized that Section 34 of the ACA allows setting aside an award where the arbitral tribunal has acted beyond its jurisdiction. By entertaining extinguished claims, the tribunal not only exceeded its jurisdiction but also contradicted settled law on the supremacy of resolution plans. Therefore, both on grounds of arbitrator bias and lack of jurisdiction, the petitioner sought the setting aside of the impugned award.
Arguments of the Respondent:
Senior Advocate Jayant Mehta, appearing for the respondent, defended the arbitral award by challenging the petitioner’s objections on both disclosure and merits. On the issue of disclosure and alleged bias, it was argued that the presiding arbitrator’s previous role as Chairperson of NCLAT did not create a conflict of interest. The respondent relied on the Supreme Court’s ruling in HRD Corporation v GAIL (India) Limited (2018) 12 SCC 471, where it was clarified that an arbitrator adjudicating previous disputes between parties does not automatically become ineligible in subsequent arbitrations. The respondent emphasized that adjudication in a judicial or quasi-judicial capacity, such as deciding an appeal in NCLAT, cannot be equated with advisory or consultative involvement, which would truly indicate bias. Thus, the presiding arbitrator’s role in a prior judicial determination did not disqualify him.
On the substantive issue, the respondent contended that its claims arose after the ICD and were distinct from claims forming part of the resolution plan. It was submitted that the resolution plan approved by the CoC and sanctioned by the NCLT only addressed pre-ICD liabilities, and did not account for obligations or expenditure incurred post-ICD. Therefore, the respondent’s claims did not fall within the extinguishment clause of the resolution plan. The respondent argued that Section 31 of the IBC could not be read so broadly as to extinguish claims that arise after ICD, because doing so would leave creditors remediless for legitimate dues incurred during the resolution process or thereafter. The respondent emphasized that commercial justice requires that such claims, which are not part of the resolution plan and which accrue later, should remain enforceable through mechanisms such as arbitration.
It was also contended that the arbitral tribunal had examined the matter and concluded that the respondent’s claims were independent of the resolution plan. The tribunal’s award, therefore, represented a legitimate interpretation of the scope of extinguishment under IBC, which should not be interfered with lightly under Section 34. The respondent urged that setting aside the award would create uncertainty for operational creditors and discourage them from supporting companies under CIRP, since it would suggest that their post-ICD claims could never be recovered. Accordingly, the respondent prayed for dismissal of the petition and upholding of the arbitral award.
Court’s Judgment:
The Delhi High Court, after carefully considering both procedural and substantive challenges, allowed the petitioner’s Section 34 petition and set aside the arbitral award. Justice Jyoti Singh first dealt with the issue of arbitrator disclosure and alleged bias. The Court observed that while Section 12(1) and (2) read with the Sixth Schedule requires disclosures in writing in the prescribed format, the tribunal had only issued a composite order. Though technically irregular, the Court held that this omission alone did not vitiate the proceedings unless it established real likelihood of bias. On the allegation that the presiding arbitrator was disqualified because he had earlier chaired an NCLAT bench deciding the respondent’s appeal against NCLT’s approval of the resolution plan, the Court held that adjudicating in a judicial capacity did not make him “involved” in the dispute in the sense required for disqualification. Previous judicial involvement cannot be equated to personal or advisory involvement with a party. Relying on HRD Corporation v GAIL, the Court ruled that there was no de jure ineligibility of the presiding arbitrator.
However, the Court decisively ruled in favor of the petitioner on the substantive issue of arbitrability of extinguished claims. Justice Jyoti Singh held that the law was now settled through authoritative pronouncements of the Supreme Court, particularly Ghanashyam Mishra and Sons Private Limited v Edelweiss ARC, which made it clear that once a resolution plan is approved, it binds all stakeholders and extinguishes all claims not forming part of the plan. The Court observed that the respondent’s claims for expenditure post-ICD were not incorporated in the resolution plan, despite the respondent having filed proofs of claim. Since the resolution professional and CoC did not include them, they stood extinguished upon approval of the plan by NCLT. The Court emphasized that permitting arbitration of such claims would amount to indirectly enforcing extinguished claims, contrary to the binding effect of Section 31 read with Section 238 of IBC.
The Court rejected the respondent’s contention that post-ICD claims remain alive, noting that the resolution plan itself explicitly stated that all claims, whether present or future, accrued or unaccrued, known or unknown, would stand extinguished upon approval. This broad extinguishment clause left no scope for arbitral adjudication of claims outside the plan. The Court clarified that while creditors may feel aggrieved by exclusion of their claims, the remedy lies in challenging the resolution plan at the appropriate stage, not in resurrecting extinguished claims through arbitration later.
Accordingly, the High Court concluded that the arbitral tribunal acted beyond its jurisdiction in entertaining and awarding claims which stood extinguished under IBC. The impugned award dated 21 August 2024 was therefore set aside. In doing so, the Court reinforced the primacy of IBC over other legislations and reiterated that arbitration cannot be used to bypass the binding effect of resolution plans.