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.
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.
- Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta (2020 8 SCC 531)
- Ghanashyam Mishra and Sons Pvt. vs. Edelweiss Asset Reconstruction Co. (2021 9 SCC 657)
A recent case of Electrosteel Steel Ltd. further emphasizes the importance of this doctrine.
Author's summary: IBC ensures certainty in insolvency resolution.
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