Delhi High Court Bars Parallel Execution Of Arbitral Award After CIRP Claim; Upholds ‘Clean Slate’ Under IBC, Imposes ₹1 Lakh Costs

Delhi High Court Bars Parallel Execution Of Arbitral Award After CIRP Claim; Upholds ‘Clean Slate’ Under IBC, Imposes ₹1 Lakh Costs

Introduction

The Delhi High Court has held that once a decree holder lodges its claim arising from an arbitral award before the Resolution Professional during the Corporate Insolvency Resolution Process (CIRP), it cannot simultaneously pursue execution proceedings under Section 36 of the Arbitration and Conciliation Act, 1996. The Court observed that such parallel enforcement would be duplicative and impermissible in light of the insolvency framework and the “clean slate” doctrine under the Insolvency and Bankruptcy Code, 2016 (IBC).

Factual Background

An arbitral award dated 12 November 2021 directed Sinnar Thermal Power Ltd. to pay approximately ₹23.96 crore to Paharpur Cooling Towers Ltd. A challenge to the award under Section 34 of the Arbitration and Conciliation Act was filed on 28 April 2022.

During the pendency of the Section 34 proceedings, Sinnar Thermal Power Ltd. was admitted into CIRP by the National Company Law Tribunal (NCLT) on 19 September 2022. On 11 October 2022, the decree holder filed its claim before the Resolution Professional, which was admitted to the extent of approximately ₹23.10 crore.

Subsequently, the Section 34 petition was withdrawn on 26 August 2025, and the resolution plan was approved on 28 November 2025.

Despite participating in the CIRP and lodging its claim, the decree holder sought to enforce the arbitral award through execution proceedings before the High Court, also seeking to proceed against group entities at the execution stage.

Procedural Background

The execution petition was filed before the Delhi High Court seeking enforcement of the arbitral award under Section 36 of the Arbitration and Conciliation Act. The judgment debtor opposed the petition, contending that once the decree holder had invoked the insolvency mechanism by filing its claim in CIRP, it could not pursue parallel execution proceedings.

The matter came up before Justice Harish Vaidyanathan Shankar for adjudication.

Issues

1. Whether a decree holder who has filed a claim during CIRP can pursue parallel execution proceedings under Section 36 of the Arbitration and Conciliation Act.

2. Whether such parallel enforcement would violate the scheme of the IBC and the “clean slate” doctrine under Section 31.

3. Whether the execution petition was maintainable in light of the approved resolution plan.

Contentions of the Parties

The decree holder contended that the arbitral award was enforceable under Section 36 of the Arbitration and Conciliation Act and sought to proceed with execution, including against group entities of the corporate debtor.

The judgment debtor argued that by lodging its claim during CIRP, the decree holder had elected to invoke the insolvency enforcement mechanism. It was submitted that permitting execution proceedings thereafter would amount to duplicative enforcement and would undermine the finality of the resolution plan approved under Section 31 of the IBC.

Reasoning and Analysis

The Court observed that once a party lodges a claim before the Resolution Professional seeking satisfaction of an arbitral award, such conduct amounts, in substance and effect, to invoking the enforcement mechanism under insolvency law.

Justice Shankar held that pursuing execution under Section 36 of the Arbitration and Conciliation Act after filing a claim in CIRP would constitute duplicative and impermissible enforcement. The insolvency regime provides a comprehensive mechanism for satisfaction of claims, and a creditor cannot simultaneously seek remedies under separate enforcement frameworks.

The Court emphasised the “clean slate” doctrine embodied in Section 31 of the IBC. Once a resolution plan is approved, all claims not forming part of the plan stand extinguished. Permitting parallel execution proceedings would strike at the very core of this doctrine and disrupt the finality intended by the insolvency framework.

In light of these principles, the Court found the execution petition to be misconceived and legally untenable.

Decision

The Delhi High Court dismissed the execution petition filed by Paharpur Cooling Towers Ltd. The Court imposed costs of ₹1 lakh on the decree holder, holding that parallel enforcement under the Arbitration and Conciliation Act, after filing a claim in CIRP, is not maintainable.