Clean Slate Doctrine Under IBC: Approved Resolution Plan Extinguishes All Sub-Judice Claims of Operational Creditors – A Legal Analysis

Case Snapshot

• Case Name: M/s Tata Steel Ltd. v. Varsha & Anr.

• Citation: 2026 INSC 717

• Bench: Justice Manmohan & Justice Manoj Misra

• Date of Judgment: July 16, 2026

• Area of Law: Insolvency and Bankruptcy Code, 2016; Corporate Resolution; Operational Creditors

Judgment in Brief

The Supreme Court allowed the appeals filed by the Successful Resolution Applicant (Tata Steel) and held that upon approval of a Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016 (IBC), all claims of operational creditors that were sub-judice or not crystallized before the approval date stand extinguished. The Court clarified that the "clean slate" doctrine applies, and no proceedings (civil suits or arbitration) can continue in respect of claims not included in the approved plan. The Court rejected the contention that notional valuation of claims at ₹1 kept them alive for future adjudication. The Resolution Plan, read as a whole, extinguished all pending claims except those quantified and included in the operational creditors' settlement amount. The civil suit and arbitration proceedings were dismissed.

Relevant Facts

• The corporate debtor, Bhushan Steel Limited (BSL), underwent Corporate Insolvency Resolution Process (CIRP) under the IBC.

• Respondent No. 1 (Varsha) had filed a civil suit against BSL for recovery of ₹38,89,674.14. The Intervenor (Masyc Projects) had initiated six separate arbitral proceedings for goods supplied to BSL.

• Both creditors submitted claims to the Resolution Professional (RP) and were admitted at a notional value of ₹1 each, as their claims were disputed and pending adjudication.

• The Interim List of Creditors (January 17, 2018) noted that claims were subject to pending disputes. However, the Final List of Creditors (March 20, 2018) omitted this note and simply stated that sub-judice claims were verified with a notional amount of ₹1.

• Tata Steel submitted a Resolution Plan, which was approved by the Committee of Creditors (CoC) and sanctioned by the NCLT on May 1

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