Supreme Court On Extinguishing Arbitration After CIRP: The Electrosteel Judgement
- IJLLR Journal
- Jun 30
- 2 min read
Kopal Singh, Dr. Ram Manohar Lohiya National Law University, Lucknow
Arbitration and insolvency frequently clash in India's developing commercial legal system. The Insolvency and Bankruptcy Code, 2016 (IBC) focuses on collective recovery, time-bound resolution, and the principle of finality, whereas arbitration encourages party autonomy, decentralized dispute resolution, and contractual certainty. Due to the conflict between these two areas, courts are frequently compelled to balance the goals of insolvency resolution with the sanctity of arbitration agreements, which has resulted in a high volume of litigation. A significant advancement in this area is the recent ruling in Electrosteel Steel Ltd. v. Ispat Carrier Ltd. [1] (April 2025) by the Supreme Court. The Court ruled that all claims, including those that might otherwise be subject to arbitration, are extinguished once a resolution plan under the IBC is approved, and arbitration cannot be used to bypass or revive them.
Brief facts of the case
Disputes arose under a supply contract between Electrosteel Steel Ltd. (the appellant) and Ispat Carrier Pvt. Ltd. (the respondent). After nonpayment, Ispat initiated proceedings before the West Bengal MSME Facilitation Council under the MSME Act. When conciliation failed, and the matter proceeded to arbitration and CIRP was started against Electrosteel while the arbitration was still pending. Following the imposition of a moratorium under Section 14 of the IBC, the NCLT, Kolkata, authorized a resolution plan that Vedanta Ltd. had submitted. Ispat's claim was not acknowledged in the plan, and there was no appeal against its omission.
After the moratorium was lifted, the arbitration resumed unopposed and resulted in a favourable award to Ispat. Electrosteel did not challenge the award under Section 34 of the Arbitration Act but raised objections only at the stage of execution. Both the executing court and the Jharkhand High Court rejected its objections, leading to the appeal before the Supreme Court.
