Resolution Plan Shields New Management, Mesne Profit Claim Lies Only Against Erstwhile Management: Calcutta HC Dismisses Appeal by Assam Company

The CalcuttaHigh Court has dismissed an appeal filed by The Assam Company India Limited (ACIL), affirming that under the approved Resolution Plan (RP), no mesne profit claim can be enforced against the corporate debtor or its new management.

It was held that while the suit for quantification of mesne profits may continue, any monetary liability arising from it must be recovered only from the erstwhile management, as expressly provided in the RP sanctioned by the National Company Law Tribunal (NCLT), Guwahati.

The dispute stems from a civil suit filed by the respondents, Numazar Dorab Mehta and others (Plaintiffs), seeking eviction and mesne profits. Although eviction was decreed in 2011 and possession was handed over in May 2019, the quantification of mesne profits remained pending before a Special Referee.

During this period, ACIL (Petitioner/Defendant) underwent a Corporate Insolvency Resolution Process (CIRP), culminating in approval of a Resolution Plan on September 20, 2018.

The RP specifically addressed the pending litigation. It recorded the suit and related appeals and provided that no claim could be enforced against ACIL or its new management.

Instead, if any financial recovery arose from the suit, it must be realised from the “existing management, a term the Court interpreted to mean the management immediately before the takeover by the successful resolution applicant.

The RP also permitted the mesne profit proceedings to continue, but insulated the corporate debtor and its new management from liability.

The respondents had approached the NCLT seeking clarification after approval of the RP. By an order dated November 29, 2018, the NCLT permitted them to proceed before the Special Referee but did not modify the RP’s stipulation that any monetary liability must be borne by the erstwhile management.

Before the High Court, ACIL argued that the suit could not continue against it in view of the RP and relied on Electrosteel Steel Ltd. v. Ispat Carrier Pvt. Ltd., 2025, where the Supreme Court held that once a resolution plan is approved under Section 31(1) of the Insolvency and Bankruptcy Code (IBC), all claims not forming part of the plan stand extinguished.

The Division Bench of Justice Debangsu Basak and Justice Md. Shabbar Rashidi held that Electrosteel was inapplicable because, unlike in that case, the mesne profit claim was expressly included and provided for in the RP. The RP did not extinguish the claim; it merely redirected liability to the prior management.

The Court observed that the RP must be read as a whole. It clearly contemplated a change in management and allocated liability accordingly. Since the events triggering the management change had occurred, the term “existing management” could only refer to the erstwhile management, not the new management that took over post‑CIRP.

The Bench reiterated the settled principle that once a resolution plan is approved, it becomes binding on all stakeholders under Section 31(1) of the IBC. Claims included in the plan are “frozen” in the manner provided in the plan, and claims excluded from the plan stand extinguished. In this case, the mesne profit claim was neither extinguished nor left open; it was specifically routed to the former management.

Accordingly, the Court held that it cannot proceed against ACIL or its new management. The respondents may continue the suit only against the erstwhile management and must take appropriate steps within two weeks. If they fail to do so, the suit will be treated as disposed of. In either scenario, the suit stands dismissed as against ACIL.

The appeal was therefore dismissed, with the Court affirming that the Resolution Plan shields the new management from liability and that any mesne profit recovery must be pursued solely against the former management.

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