Approved Resolution Plans Extinguish All Pre-CIRP Statutory Dues Under the Clean Slate Doctrine

Two writ petitions were filed by successful resolution applicants challenging demand notices issued by UP state electricity DISCOMs for dues pertaining to the period prior to the approval of Corporate Insolvency Resolution Plans (CIRP).

In the first case, the petitioner’s resolution plan was approved on 15.06.2022 [para 8]; however, following an inspection on 17.10.2022, the respondents raised demands for auxiliary power consumption dating back to 2015

In the second case, Tata Steel (as successor to Bhushan Steel) challenged demands for differential tariffs and excess loads for the period 2011–2018, despite a resolution plan being approved on 15.05.2018

The respondents argued that electricity dues are statutory "secured" debts and that they were not personally served with CIRP notices

1. Whether the Insolvency and Bankruptcy Code (IBC), 2016 overrides the Electricity Act, 2003, thereby barring demands for pre-resolution period dues after the plan is implemented.

2. Whether statutory authorities are entitled to separate/individual notice of CIRP beyond the public announcement.

3. Whether claims not filed during the CIRP stand extinguished under the "Clean Slate" doctrine upon approval of the resolution plan.

Section 238 of the IBC, which mandates that the Code overrides any inconsistent provisions in other laws

Section 31(1), which makes an approved resolution plan binding on all stakeholders, including Government authorities

"Clean Slate" doctrine established in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, holding that undecided claims cannot "pop up" after resolution

Ghanshyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., confirming that statutory dues not part of the plan stand extinguished

Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Pvt. Ltd., which held that Section 238 of the IBC overrides Sections 173 and 174 of the Electricity Act, 2003

RPS Infrastructure Ltd. v. Mukul Kumar, stating that public announcements under Section 15 of the IBC constitute sufficient notice in rem

The Court reasoned that the IBC is a subsequent, comprehensive legislation intended to ensure the revival of corporate debtors, which would be frustrated if new liabilities were imposed post-resolution

It rejected the respondents' reliance on Rainbow Papers, noting that the Supreme Court later clarified in Paschimanchal Vidyut Vitran Nigam Ltd. that IBC's "waterfall mechanism" places government dues below secured and operational creditors

The Court found that since the respondents failed to file claims during the CIRP despite the statutory public announcement, their claims were extinguished by operation of law

The Court emphasized that a resolved company is a "legally reborn entity" and cannot be burdened with the "corporate soul's" past debts, regardless of whether it retains the same name

The Court distinguished between pre-CIRP dues (extinguished) and post-resolution liabilities (recoverable), noting that while the "slate is clean" for the past, the petitioner must comply with electricity laws for current consumption

The Court allowed the petitions and quashed the impugned demand notices to the extent they pertained to the pre-CIRP period. The respondents were granted liberty to issue fresh notices confined strictly to dues occurring in the post-resolution period in accordance with law