“Supreme Court Rules: IBC Doesn’t Allow Demands on Successful Resolution Applicant for Corporate Debtor’s Electricity Arrears”


In a recent landmark ruling, the Supreme Court of India has provided a significant clarification regarding the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC), with respect to the obligations of a successful resolution applicant. The ruling underscores a crucial aspect of the IBC framework that pertains to the resolution process and the responsibilities of the parties involved.

The essence of this ruling lies in the principle that once the Resolution Plan is duly approved by the National Company Law Tribunal (NCLT), the Electricity Department is precluded from seeking payment of arrears that were originally payable by the Corporate Debtor from the successful resolution applicant. This judicial interpretation addresses a pertinent issue that often arises in the context of insolvency proceedings.

The Supreme Court’s decision underscores the sanctity of the resolution process under the IBC and the finality of the NCLT’s approval of the Resolution Plan. It signifies that the successful resolution applicant should not be burdened with the liabilities and arrears of the corporate debtor that existed prior to the insolvency proceedings.

This ruling provides much-needed clarity and protection for resolution applicants, ensuring that they are not encumbered with additional financial obligations that were not envisaged as part of the approved Resolution Plan. It upholds the principle that the IBC aims to streamline the insolvency resolution process and facilitate the revival of distressed companies, and, as such, demands on successful resolution applicants for pre-existing liabilities would be contrary to the intent and spirit of the IBC.

In essence, this Supreme Court ruling sets an important precedent by reinforcing the notion that once a Resolution Plan is approved, the successful resolution applicant should not be held liable for the corporate debtor’s past obligations, particularly when it comes to matters such as electricity arrears. This decision bolsters the IBC’s effectiveness in expediting the resolution of insolvency cases and provides greater clarity and confidence to prospective resolution applicants participating in the insolvency process.

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