The Paradox Of Clean Slate Theory: Status Of Unliquidated Claims Of Workmen
Ipkshita Singh, School of Law Christ University, Bangalore
The Supreme Court of India in its recent decision in Ghanashyam Mishra and Sons v. Edelweiss Asset Reconstruction Company (“Edelweiss”) observed that after the approval of a resolution plan, all the claims shall be binding upon the corporate debtor and unadmitted claims shall stand extinguished on such date.1 This judgement crystallizes the clean slate theory laid down in the case of CoC of Essar Steel India Ltd. Through Authorised Signatory v. Satish Kumar Gupta & Ors. (“Essar Steel”). The reasoning stemmed from the finality granted to a resolution plan by virtue of Section 31(1) of the Insolvency and Bankruptcy Code (“the Code”).
In this regard the Supreme Court in Essar Steel has observed, “All claims must be submitted…so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the Corporate Debtor.” 2
While disposing the unadmitted claims of workmen in Edelweiss, the Court quashed the order of NCLAT,3 wherein the tribunal observed that workmen were entitled to continue proceedings before a competent court after the expiry of the moratorium period. While deciding in favour of the workmen of Sundargarh Mines & Transport Workers Union (SMTWU), the NCLAT placed reliance on the wordings of Section 60(6) of the Code. While doing so, the Hon’ble tribunal reaffirmed that for the purposes of bringing a suit before a civil court, the period of moratorium ought to be excluded from the limitation period.