Madhya Pradesh High Court Bars Post-Resolution Proceedings Against Corporate Debtor's “New Avatar”

The Madhya Pradesh High Court on 27 May held that once a resolution plan is approved under the Insolvency and Bankruptcy Code, 2016, the corporate debtor in its “new avatar” cannot face pre-resolution claims or proceedings that stand extinguished under the approved plan.

Justice Jai Kumar Pillai reiterated that the insolvency framework ensures a “clean slate” to the successful resolution applicant and allowed the petition filed by Pushp Ratna Realty Pvt Ltd, whose resolution plan the NCLT, Indore had approved. The Bench observed:

“...once a Resolution Plan is approved by the NCLT, the Corporate Debtor undergoes a "clean slate" transition. The intent of the legislature is to ensure that a Successful Resolution Applicant is not saddled with surprise claims, prior liabilities, or legacy litigations that could frustrate the very objective of reviving the Corporate Debtor. The continuation of pre- resolution claims in collateral forums directly militates against this statutory protection.”

The petitioner, through its successful resolution applicant, approached the High Court alleging that erstwhile shareholders continued or initiated multiple proceedings despite approval of the resolution plan. The dispute arose from its real estate project “Lush by Pushparatna”, which led to disputes among erstwhile stakeholders and stalled the project.

CIRP began in October 2024. The NCLAT and the Supreme Court dismissed challenges to the insolvency process. The NCLT approved the resolution plan on 9 March 2026 and transferred control of the corporate debtor to the successful resolution applicant.

The petitioner submitted that despite this, civil and other proceedings continued or were initiated by the erstwhile management and their relatives, including a suit in which the doctrine of lis pendens was applied to the project land. It argued that Sections 31, 32A, 231 and 238 of the IBC barred such proceedings, as they extinguished pre-resolution claims not included in the approved plan.

On maintainability, the Court relied on Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and held that the existence of an alternative remedy does not bar writ jurisdiction where proceedings lack jurisdiction and violate statutory prohibition. It observed:

“…the initiation and continuation of civil and revenue proceedings across various forums, post the approval of the Resolution Plan, constitute an impermissible indirect challenge to the finality of the NCLT's order.”

Relying on Ghanshyam Mishra and Sons Private Limited vs Edelweiss Asset Reconstruction Company Limited, JSW Steel Limited vs Pratishtha Thakur Haritwal and Vaibhav Goel vs Deputy Commissioner of Income Tax, the Court reiterated that claims not forming part of an approved resolution plan stand extinguished and cannot be enforced independently.

Further, the Bench held that the corporate debtor in its “new Avatar” enjoys statutory protection under the IBC, and parties cannot revive pre-resolution claims through collateral proceedings after approval of the resolution plan. It held that such proceedings may amount to an abuse of process. It observed:

“22(vi) Without first ascertaining the primary issue of maintainability of any such proceedings, any interim order including observing applicability of lis pendens, if passed in any proceedings concerning the effect of Corporate Debtor in its new Avatar shall be illegal and void.”

Accordingly, the High Court disposed of the petition and directed courts and authorities to first determine maintainability before proceeding further, while granting liberty to the petitioner to seek vacation of adverse interim orders.

For Petitioner: Advocate Vishal J Dave

For Respondent: Advocate D.S Chouhan