Supreme Court Allows Set-Off Defence Against Ujaas Energy Though Counterclaim Extinguished Under IBC
Kirit Singhania
20 March 2026 9:34 PM IST
The Supreme Court on Friday allowed West Bengal Power Development Corporation Ltd. to raise a plea of set-off as a defence in arbitration proceedings against Ujaas Energy Ltd., even though its counterclaim stood extinguished after approval of the resolution plan under the Insolvency and Bankruptcy Code.
A bench of Justices Dipankar Datta and Augustine George Masih while granting the relief observed:
“Upon a cumulative consideration of all relevant factors, we hold that the respondent, although not entitled to independently pursue its claim by way of counterclaim post approval of the resolution plan, ought to be permitted to raise the plea of set-off at least by way of defence. It is ordered accordingly.”
The dispute arose from an e-tender floated on February 15, 2017 for manufacture, procurement and installation of grid-connected rooftop solar photovoltaic power plants at various locations in West Bengal, pursuant to which a Letter of Award was issued to Ujaas Energy on May 12, 2017.
Ujaas Energy was admitted into the Corporate Insolvency Resolution Process on September 17, 2020. During the pendency of disputes, arbitration was invoked on December 31, 2021, and the statement of claim and counterclaim were filed in 2023. The resolution plan was approved by the National Company Law Tribunal, Indore, on October 13, 2023.
On April 30, 2024, the arbitral tribunal passed an interim award rejecting the respondent's counterclaim on the ground that the claim had not been submitted before the resolution professional during the CIRP and therefore stood extinguished after approval of the resolution plan. The order was upheld by a Single Judge of the Calcutta High Court on August 21, 2024.
However, the Division Bench of the High Court set aside the ruling on September 2, 2024 and directed continuation of the arbitration proceedings, leading to the present appeal before the Supreme Court.
The Supreme Court held that once a resolution plan is approved under Section 31 of the Insolvency and Bankruptcy Code, claims not forming part of the plan cannot be enforced, and therefore the respondent was not entitled to pursue any counterclaim seeking affirmative relief.
At the same time, the court examined the terms of the resolution plan and found that while it barred claims for payment or settlement, it did not expressly prohibit a plea of set-off being raised as a defence in pending proceedings.
The court said:
“In our opinion, the abovementioned clause of the resolution plan does not expressly, or even impliedly, exclude the plea of set-off as a defence; the same merely bars any claim for the purpose of payment or settlement. Since such defensive use has not been expressly provided and, in our view, is also not expressly covered, an intention to exclude it would ordinarily be inferred by application of the maxim expressio unius est exclusio alterius.”
Clarifying the limited scope of the relief, the bench held that the respondent could rely on the plea of set-off only to defend itself in arbitration and could not obtain any independent recovery.
The court further clarified that if the amount claimed by the respondent exceeds the amount awarded to the appellant, the surplus would not be recoverable, and the defence would operate only to the extent necessary to reduce or defeat the appellant's claim.
Observing that the conclusion was based on the terms of the resolution plan in the present case, the court partly allowed the appeal and modified the order of the Calcutta High Court Division Bench.