Authority: Supreme Court of India (Civil Appellate Jurisdiction)

Order Date: 17 July 2026

Case Overview

  • Parties: Appellant – M/s Tata Steel Ltd (Successful Resolution Applicant); Respondents – Varsha (Operational Creditor) and Intervenor – Masyc Projects Private Limited.
  • Background: Bhushan Steel Ltd (the corporate debtor) was subjected to a Corporate Insolvency Resolution Process (CIRP) initiated by State Bank of India. Operational creditors Varsha and Masyc filed a summary civil suit and multiple arbitrations respectively, seeking recovery of ₹38,89,674.14 and ₹31,30,67,354. During CIRP, both creditors lodged claims of ₹34,27,895 and ₹31,30,67,354 as operational creditors. The Interim List of Creditors (17 Jan 2018) admitted each claim at a notional ₹1, later modified for Varsha to ₹1,66,66,707 with interest. The Final List of Creditors (20 Mar 2018) again recorded each claim at ₹1, with a note that disputed claims were verified at a notional amount of ₹1.
  • Tata Steel submitted a Resolution Plan on 3 Feb 2018. The Plan identified a Resolution Debt of ₹57,160 crore, Outstanding Financial Debt of ₹5,60,51,46,40,323 and Outstanding Operational Debt of ₹10,50,88,68,566. The Liquidation Value was ₹1,45,41,00,00,000. Clause 6.1 stipulated that because the liquidation value was nil, no payment was due to operational creditors. Nevertheless, Clause 8.2.2 created an Operational Creditors Settlement Amount of ₹12,00,00,00,000, earmarking ₹10,000 crore for essential/critical operational creditors and ₹200 crore for other operational creditors on a pro‑rata basis within 12 months of the closing date (15 May 2018).
  • The Committee of Creditors approved the Plan; NCLT sanctioned it on 15 May 2018; NCLAT dismissed appeals on 10 Aug 2018. Subsequent applications by Tata Steel to dismiss the civil suit (Oct 2018) and arbitration (Jan 2019) were rejected. High Court of Bombay, Nagpur Bench dismissed Tata Steel’s writ petition (28 Mar 2019) and review (9 Jul 2019). A separate writ in Punjab & Haryana High Court (30 Jan 2020) also dismissed the arbitration challenge.
  • Intervenor‑Masyc filed an intervention (I.A. No. 34503 of 2020) which the Supreme Court allowed on 27 Aug 2021, raising the issue of a similar question of law.

Final Outcome

  • The Supreme Court condoned delay, granted leave, and allowed the civil appeals filed by Tata Steel.
  • It set aside the Bombay High Court orders dated 28 March 2019 and 9 July 2019.
  • The Court dismissed the recovery suit filed by Varsha (Civil Suit No. 153/2011) and the arbitration proceedings initiated by Intervenor‑Masyc.
  • It held that the Resolution Plan’s provisions are binding: all sub‑judice operational creditor claims are extinguished, and only a nominal amount of ₹1 is payable to each of Varsha and Masyc.
  • The Court affirmed that the Operational Creditors Settlement Amount of ₹12,00,00,00,000 is the ceiling, with only ₹200 crore available for pro‑rata distribution to crystallised operational creditor claims as of 20 March 2018.
  • By reinforcing the “clean slate” doctrine, the judgment declared that no further liabilities exist for operational creditors beyond the settlement fund, and all legal proceedings pending against the corporate debtor are deemed withdrawn, abated, settled, or extinguished.
  • The decision underscores that the Resolution Plan, once approved under Section 31(1) of the Insolvency and Bankruptcy Code, freezes all claims not incorporated therein, rendering them unenforceable.

Topics: Insolvency, Operational Creditors, Clean Slate Doctrine