The Clean Slate Doctrine under IBC
The Insolvency and Bankruptcy Code, 2016 (“IBC”) has reshaped the insolvency framework in India by prioritizing time-bound resolution and certainty for stakeholders.
At the heart of this framework lies the clean slate doctrine, which ensures that once a resolution plan is approved, the successful resolution applicant (“SRA”) takes over the corporate debtor free from historical liabilities.
Supreme Court Rulings
The Supreme Court has firmly established that claims not filed or adjudicated during the Corporate Insolvency Resolution Process (“CIRP”) cannot survive beyond approval of the plan, as seen in the following cases:
- Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2020 8 SCC 531)
- Ghanashyam Mishra and Sons Pvt. v. Edelweiss Asset Reconstruction Co. (2021 9 SCC 657)
Claims not filed or adjudicated during the CIRP cannot survive beyond approval of the plan.
Recent Case Law
A recent case of Electrosteel Steel Ltd. further reinforces the application of the clean slate doctrine.
Author's summary: IBC ensures certainty in insolvency resolution.