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The Supreme Court of India, by way of its judgement dated 20.03.2026 in the matter of Ujaas Energy Limited v. West Bengal Power Development Corporation Limited1, held that the plea for set-off can be raised as a defence in arbitral proceedings even after approval of resolution plan by National Company Law Tribunal.
In the present matter, West Bengal Power Development Corporation Limited ("WBPDCL") issued a letter of award in favour of Ujaas Energy Limited ("UEL") for manufacture, procurement, installation, etc. of grid connected rooftop solar PV power plant. Thereafter, UEL was admitted into Corporate Insolvency Resolution Process ("CIRP"). WBPDCL had failed to raise any claim before the resolution professional prior to approval of the resolution plan of UEL and raised its counterclaim before the arbitral tribunal in an arbitration invoked by UEL. It was contended by UEL that WBPDCL cannot raise any claim / counterclaim after approval of the resolution plan, as the same is against the 'clean slate' principle under Insolvency and Bankruptcy Code, 2016 ("IBC").
The court perused the resolution plan of UEL and observed that, although the resolution plan barred claims for any payment, settlement, including a counterclaim, the resolution plan did not bar a plea of set-off being raised as a defence in any pending arbitral proceedings. The court also clarified that WBPDCL shall not derive any positive or affirmative relief on the basis of the said defence and may only defend itself against the claim raised by the UEL, i.e., in the event the amount claimed by WBPDCL in counterclaim is found to be due and payable by UEL, and such amount exceeds the amount awarded to UEL, then such surplus amount will not be recoverable by WBPDCL. Similarly, if an amount remains payable to UEL after adjustment of WBPDCL's seat-off plea, the same shall be recoverable by UEL.
Footnote
1. 9SLP (Civil) No. 29651 of 2024.
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