Court Upholds "Clean Slate Doctrine" under Insolvency and Bankruptcy Code, 2016, Extinguishing Rehabilitation Policy Claims Against Corporate Debtor Post NCLT Resolution Plan Sanction
In a significant judgment delivered on September 15, 2026, the Madhya Pradesh High Court (Jabalpur Bench) ruled against Keshav Prasad Jayaswal, who had sought benefits under the Madhya Pradesh Rehabilitation Policy, 2002, following the acquisition of his land by Essar Power M.P. Ltd. The Court held that claims for rehabilitation benefits could not be enforced against a corporate debtor or its successor once the National Company Law Tribunal (NCLT) approved a resolution plan under the Insolvency and Bankruptcy Code (IBC), 2016.
The petitioner, Mr. Jayaswal, had filed a writ petition challenging the rejection of his claim by the Collector, Singrouli, who denied his status as a displaced person under the Government of Madhya Pradesh's rehabilitation scheme. The petitioner's land and house were acquired by Essar Power M.P. Ltd., and he claimed entitlement to residential land and other benefits as per the 'Madhya Pradesh Ki Adarsh Punarvas Niti, 2002' policy.
However, during the pendency of the petition, Essar Power M.P. Ltd. underwent Corporate Insolvency Resolution Process (CIRP) under the IBC, and the resolution plan submitted by M/s Adani Power Limited was approved by the NCLT on November 1, 2021. The corporate debtor was subsequently renamed Mahan Energen Ltd. The Court relied on Section 31(1) of the IBC, which declares that the approved resolution plan is binding on the corporate debtor, creditors, government authorities, and all stakeholders, and that all claims not part of the resolution plan stand extinguished by operation of law - a principle commonly referred to as the "Clean Slate Doctrine."
The Court referred to several Supreme Court judgments, including the landmark case Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta (2020), which clarified that no pending or undecided claims can be enforced against the corporate debtor post-approval of the resolution plan. The Court emphasized that welfare-oriented policies such as the Rehabilitation Policy cannot override the IBC's overriding effect under Section 238, which supersedes any inconsistent state enactments or policies.
Regarding the petitioner's claim against the State authorities, the Court observed that the Collector had conducted a thorough inquiry and found that the petitioner did not reside in the area prior to the issuance of the land acquisition notification. The petitioner had constructed a tin shade after the notification, which excluded him from the definition of a displaced person under the policy. The Court declined to interfere with the Collector's order, noting that writ jurisdiction under Article 226 of the Constitution of India is not a substitute for an appellate authority and cannot be invoked to reappraise evidence.
Thus, the Court dismissed the writ petition, holding that the petitioner's claims against the corporate debtor and its successor were barred by the Clean Slate Doctrine under the IBC, and the claims against the State authorities lacked merit on facts and law.
This judgment clarifies the legal position on the non-enforceability of rehabilitation and similar claims against corporate debtors post insolvency resolution plan approval, reinforcing the supremacy of the IBC framework over inconsistent state policies.
Bottom Line:
Rehabilitation Policy - Claims related to Rehabilitation Policy benefits for displaced persons cannot be enforced against a corporate debtor or its successor after the approval of the resolution plan by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016, as such claims are extinguished under the "Clean Slate Doctrine."
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 31(1), 238; Constitution of India Article 226; Madhya Pradesh Ki Adarsh Punarvas Niti, 2002 (Rehabilitation Policy)
Keshav Prasad Jayaswal v. State of Madhya Pradesh, (MP)(Jabalpur) : Law Finder Doc Id # 2981496
