Arbitral award claim omitted from CIRP extinguished; Delhi HC orders return of ₹5.52 crore deposited during challenge

Bharat Heavy Electricals Limited invited bids for two barrel-type blender reclaimers. McNally Bharat Engineering Company Limited (“MBECL”) engaged Metso India Pvt. Ltd. (“Metso”) to provide technical and commercial information and subsequently entered into an agreement dated 12 July 2011 for the design, manufacture, supply and supervision of erection and commissioning of the reclaimers. MBECL terminated the agreement on 21 November 2011, following disputes between the parties.

Metso invoked arbitration, resulting in an award dated 5 May 2018 directing MBECL to pay approximately ₹5.52 crore, with post-award interest at 12% per annum.

MBECL challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. As a condition for stay of execution, the Court directed MBECL to deposit the awarded amount; the amount was deposited in an FDR in the name of the Registrar General on 1 September 2021.

MBECL was admitted into CIRP on 29 April 2022, and the resolution plan submitted by BTL EPC Limited was approved on 19 December 2023. Metso did not submit its awarded claim before the Resolution Professional. MBECL thereafter sought dismissal of the Section 34 petition as infructuous and release of the deposited amount, while Metso sought withdrawal of the deposit.

1. Whether Metso’s claim under the arbitral award, not having been submitted or included in the approved resolution plan, stood extinguished under the Insolvency and Bankruptcy Code, 2016, thereby rendering the Section 34 challenge infructuous?

2. Whether the amount deposited by MBECL in Court as a condition for stay remained an asset of MBECL and was liable to be released to it after extinguishment of Metso’s claim?

The Court applied Sections 3(6), 3(10) and 3(11) of the IBC, under which a “claim” includes a right to payment whether or not reduced to judgment, a creditor includes a decree-holder, and debt means liability or obligation in respect of a claim.

Under Sections 29 and 31 of the IBC, the resolution professional must disclose relevant claims and disputes in the information memorandum, and an approved resolution plan binds the corporate debtor and creditors; claims not forming part of the approved plan stand extinguished and cannot thereafter be initiated or continued.

The Court relied on Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657, and Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531, for the “clean slate” principle.

It also relied on M/s Tata Steel Ltd. v. Varsha, 2026 INSC 717, JSW Ispat Special Products Ltd. v. Bharat Petroresources Ltd., 2025 SCC OnLine Del 6869, Akash Construction v. Indira Priyadarshini Hydro Power Pvt. Ltd., 2024 SCC OnLine Del 3602, and Vijay Prakash v. Alok Industries Ltd., 2024 SCC OnLine Del 5068, recognising that unresolved claims, including arbitral claims challenged under Section 34, cannot survive approval of a resolution plan if they were not included in it.

On the deposit issue, the Court held that a deposit made as security for an award is not equivalent to unconditional payment to the award-holder; title remains with the depositing corporate debtor, while possession remains with the Court.

The Court followed the reasoning in Siti Networks Ltd. v. Rajiv Suri, 2024 SCC OnLine Bom 3550, and Reliance Naval and Engineering Ltd. v. Afcons Infrastructure Ltd., 2025 SCC OnLine Bom 6082.

The awarded amount constituted a “claim” and the amount owed by MBECL constituted a “debt” under the IBC, notwithstanding that the award was under challenge under Section 34.

Metso was therefore required to submit its claim during the CIRP. Since it failed to do so and the claim was not incorporated in the approved resolution plan, Section 31 and the clean-slate principle extinguished the claim.

Continuing the Section 34 proceedings would serve no practical purpose because even if the award were upheld, Metso could not enforce the extinguished claim against the corporate debtor.

The Court further held that the deposit was made only to secure the award pending adjudication of the Section 34 petition and did not transfer ownership to Metso. It remained an asset of MBECL in the custody of the Court.

Once Metso’s claim and the corresponding enforcement right stood extinguished, there was no justification for retaining the deposit, and the amount was required to be returned to MBECL.

Consequently, MBECL’s Section 34 petition was dismissed as having become infructuous.

MBECL’s application for release of the deposited amount was allowed, and the Registry was directed to release ₹5,52,30,693, together with the interest accrued on the FDR, to MBECL. All pending applications were disposed of.