Manjeet Cotton Pvt Ltd vs Phoenix Arc Pvt Ltd

(Arising against the impugned order dated 03.09.2025 passed by the National Company Law Tribunal, Mumbai Bench in I.A. No. 1393 of 2022 in Company Petition No. IB No. 2285(MB)/C-II/2018.

IN THE MATTER OF:

M/s Manjeet Cotton Pvt. Ltd., (SRA) Add:- 318, N-3, Cidco, Jalna Road, Near Punjab National Bank, Aurangabad, ...Appellant Maharashtra - 431009.

Versus

Phoenix ARC Pvt. Ltd., Trustee of Phoenix Trust FY 16-4 Add:- 5th Floor, Dani Corporate Park 158, CST ...Respondent

Road, Kalina, Santacruz (East), Mumbai 400098.

Present:

For Appellant: Mr. Gaurav Mitra, Ms. Pranati Bhatnagar, Ms. Dhairya B. Verenkar, Advocates.

For Respondent: Mr. Vardhman Kaushik, Mr. Dhruv Joshi, Mr. Arundam Sarin, Advocates

J U D G M EN T (27th April, 2026)

INDEVAR PANDEY, MEMBER (T)

The present Appeal has been preferred under Section 61 of the

Insolvency and Bankruptcy Code, 2016 (herein after the 'Code') by the

Appellant, M/s Manjeet Cotton Pvt. Ltd., being the Successful Cont'd..../ -2-

Resolution Applicant of the Deegee Cotsyn Pvt. Ltd. (Corporate Debtor),

assailing the legality and correctness of the impugned order dated

03.09.2025 passed by the Ld. National Company Law Tribunal, Mumbai

Bench (Adjudicating Authority) in I.A. No. 1393 of 2022 in Company

Petition No. IB No. 2285/MB/2018. By the said impugned order, the

Adjudicating Authority has allowed the application filed by the Respondent,

Phoenix ARC Pvt. Ltd., (Financial Creditor), and directed that the

surplus amount of Rs. 1 crore generated during the Corporate Insolvency

Resolution Process (CIRP) period from 01.11.2019 to 11.03.2022 be

distributed among the financial creditors in accordance with the waterfall

mechanism prescribed under Section 53 of the Code. The Adjudicating

Authority has further held that the Appellant, M/s Manjeet Cotton Pvt.

Ltd., in its capacity as Successful Resolution Applicant, is not entitled to

claim the said surplus amount on the ground that it was generated during

the CIRP period, prior to the approval and implementation of the Resolution

Plan.

2. Aggrieved by the said findings, particularly on the ground that the

impugned order effectively alters and overrides the terms of the duly

approved Resolution Plan, which had attained finality under Section 31 of

the Code and was binding on all stakeholders including the Respondent,

Phoenix ARC Pvt. Ltd.; the Appellant has preferred the present Appeal

raising substantial questions of law concerning the entitlement over CIRP-

generated surplus and the sanctity and binding nature of an approved

Resolution Plan.

Company Appeal (AT) (Ins.) No. 1676 of 2025 -3-

Brief facts of the case

3. The brief facts of the case are as given below:

(i) The Corporate Debtor, Deegee Cotsyn Private Limited, was

incorporated with its registered office at Amravati, Maharashtra, and

had availed various financial facilities from a consortium of banks led

by UCO Bank, including Term Loan I (Spinning), Term Loan II (Power),

and Cash Credit facilities, aggregating to substantial amounts, out of

which an amount of Rs. 28,05,66,577/- remained outstanding as on

31.03.2018. The account of the Corporate Debtor had already been

classified as Non-Performing Asset on 31.12.2014 due to persistent

defaults in repayment.

(ii) The said debt, along with underlying security interests, was assigned

by UCO Bank in favour of Phoenix ARC Pvt. Ltd., acting as trustee of

Phoenix Trust FY 16-4, pursuant to an Assignment Agreement

executed on 29.06.2015, thereby vesting the Respondent with all

rights as Financial Creditor under the Code, including the right to

initiate insolvency proceedings.

(iii) In exercise of such rights, the Respondent filed an application under

Section 7 of the Code before the Adjudicating Authority being

Company Petition No. IB 2285/MB/2018, and upon satisfaction of

existence of financial debt and default, the Adjudicating Authority

admitted the petition vide order dated 26.02.2019, thereby initiating

the Corporate Insolvency Resolution Process against the Corporate

Debtor and appointing an Interim Resolution Professional.

Company Appeal (AT) (Ins.) No. 1676 of 2025 -4-

(iv) Following admission of the petition, a public announcement was

issued under the CIRP Regulations inviting claims from all creditors,

and pursuant thereto, claims aggregating to Rs.164,27,31,562/- were

admitted by the Resolution Professional, reflecting the financial

position and liabilities of the Corporate Debtor.

(v) The Information Memorandum was prepared in May 2019 detailing the

assets and liabilities of the Corporate Debtor as on 26.02.2019,

wherein inter alia, the cash balance of the Corporate Debtor was

recorded at Rs. 43,87,046/-, and such financial disclosures formed the

basis for prospective resolution applicants to evaluate the viability of

submitting a Resolution Plan.

(vi) Thereafter, Expression of Interest was invited by issuance of Form-G

on 17.07.2019, pursuant to which seven prospective resolution

applicants expressed interest, however, ultimately only three

Resolution Plans were submitted for consideration by the Committee of

Creditors.

(vii) The Committee of Creditors, after detailed deliberations, in its 9th

meeting held on 16.11.2019, approved the Resolution Plan submitted

by the Appellant, M/s Manjeet Cotton Pvt. Ltd., with a voting share of

67.54%, wherein notably the Respondent/Financial Creditor holding

22.23% voting share also voted in favour of the said Resolution Plan,

thereby accepting the terms and treatment proposed therein.

(viii) The Resolution Plan, as approved by the CoC, specifically provided

for payment to financial creditors to the extent of 31.5% of their

admitted claims, crystallized at Rs.3100 lakhs, and further

Company Appeal (AT) (Ins.) No. 1676 of 2025 -5-

incorporated a clear stipulation under Clause 4.1(i) that all claims of

creditors beyond the treatment provided in the Resolution Plan would

stand extinguished upon approval, thereby bringing finality to all past

liabilities.

(ix) The Resolution Plan was thereafter placed before the Adjudicating

Authority by way of I.A. No. 3760 of 2019 under Section 30(6) of the

Code, and the same was approved vide order dated 11.03.2022,

thereby making the Resolution Plan binding on all stakeholders

including the Corporate Debtor, its employees, creditors, guarantors,

and all other concerned parties in terms of Section 31 of the Code.

(x) During the CIRP period, particularly between 01.11.2019 and

11.03.2022, the Corporate Debtor was run as a going concern under

the supervision of the Resolution Professional, and through its

operations, generated surplus cash flows amounting to approximately

Rs.1 crore, without affecting its working capital requirements.

(xi) Upon approval of the Resolution Plan, the Appellant, as Successful

Resolution Applicant, took over the management and control of the

Corporate Debtor and proceeded to implement the Resolution Plan,

including making upfront payments towards settlement of creditor

claims and additionally infusing a sum of Rs.16 crores as working

capital to revive and run the business of the Corporate Debtor as a

going concern.

(xii) The implementation process was duly overseen by the Monitoring

Committee, and upon successful transfer of control to the Appellant,

the Monitoring Committee was dissolved in its 4th meeting held on

Company Appeal (AT) (Ins.) No. 1676 of 2025 -6-

01.06.2022, thereby marking completion of CIRP and transition to the

new management.

(xiii) The Respondent/Financial Creditor, filed I.A. No. 1393 of 2022 on

17.05.2022 before the Adjudicating Authority seeking directions for

distribution of the surplus amount of Rs.1 crore generated during

CIRP amongst financial creditors under Section 53 of the Code,

contending that the said amount constituted excess funds generated

prior to implementation of the Resolution Plan.

(xiv) The Appellant contested the said application and also filed an

intervention application being I.A. No. 2544 of 2022 asserting that

upon approval of the Resolution Plan, all assets of the Corporate

Debtor, including cash flows generated during CIRP, stood vested in

the Appellant, and no further claims or redistribution could be

permitted beyond the terms of the approved Resolution Plan.

(xv) The Adjudicating Authority, vide order dated 03.09.2025, allowed the

application filed by the Respondent and held that since the surplus

amount of Rs.1 crore was generated during the CIRP period and prior

to the approval and implementation of the Resolution Plan, the

Successful Resolution Applicant could not claim entitlement over the

same, and accordingly directed that the said amount be distributed

amongst the financial creditors in accordance with Section 53 of the

Code.

(xvi) The Adjudicating Authority observed that the surplus amount

constituted part of the CIRP estate and not part of the assets vesting in

Company Appeal (AT) (Ins.) No. 1676 of 2025 -7-

the Successful Resolution Applicant, thereby rejecting the claim of the

Appellant and allowing redistribution to creditors.

(xvii) Being aggrieved by the said impugned order, the Appellant has

preferred the present Appeal raising substantial questions of law

regarding entitlement to CIRP-generated surplus and limits of judicial

interference post approval of a Resolution Plan.

Submissions of the Appellant

4. Shri Gaurav Mitra, Ld. Counsel for the Appellant submitted that the

present Appeal has been preferred by the Appellant, Manjeet Cotton Pvt.

Ltd., assailing the Impugned Order dated 03.09.2025 passed by the

Adjudicating Authority, whereby, it has been directed that the surplus

amount of Rs.1,42,72,094.93/- generated during the Corporate Insolvency

Resolution Process (CIRP) period, i.e., from 26.02.2019 to 11.03.2022, be

distributed in accordance with the waterfall mechanism prescribed under

Section 53 of the Insolvency and Bankruptcy Code, 2016. The counsel for

the Appellant submits that the said direction is contrary to the terms of the

approved Resolution Plan and is legally unsustainable.

5. He submitted that a proper interpretation of Clause 3.9.5 of the

approved Resolution Plan clearly demonstrates that all assets of the

Corporate Debtor (CD), including all rights, interests, benefits, and

accretions thereto, stand vested in favour of the Resolution Applicant

without any reservation or exception, unless expressly provided otherwise.

The counsel submits that the clause is unequivocal in its intent and leaves

no ambiguity regarding the comprehensive transfer of ownership.

Company Appeal (AT) (Ins.) No. 1676 of 2025 -8-

6. Ld. Counsel submits that a bare reading of Clause 3.9.5 makes it

abundantly clear that the Resolution Plan envisages a transfer of the

Corporate Debtor as a going concern in its entirety, and not merely a

limited or asset-specific transfer. It is submitted that the Resolution

Applicant is intended to acquire the Corporate Debtor along with its entire

economic value, inclusive of all tangible and intangible benefits attached

thereto.

7. It is submitted that the surplus amount generated during the CIRP

period is in the nature of an accretion to the assets of the Corporate

Debtor, arising from its business operations, while it was being run as a

going concern. The counsel submits that such accretions cannot be

segregated or treated independently from the assets of the Corporate

Debtor and necessarily fall within the scope of Clause 3.9.5 of the

Resolution Plan.

8. He further submitted that there exists no exclusionary clause within

the approved Resolution Plan, which provides that such surplus generated

during CIRP is to be appropriated towards liabilities of the Corporate

Debtor. On the contrary, Clause 3.9.5 expressly provides that "margin

money and fixed deposits, if any, shall continue to be part of the company's

assets and shall not be adjusted by the lender against any outstanding

dues". The counsel submits that since the surplus generated during CIRP

was admittedly parked in a fixed deposit, the same could not have been

subjected to distribution under Section 53 of the Code.

Company Appeal (AT) (Ins.) No. 1676 of 2025 -9-

9. It is further submitted that the amount of Rs. 44 lakhs reflected

under the head "Cash & Cash Equivalents" forms an integral part of the

assets of the Corporate Debtor and is liable to be transferred to the

Appellant in terms of the Resolution Plan.

10. Ld. Counsel places reliance upon the judgment of the Hon'ble

Supreme Court in Ebix Singapore Pvt. Ltd. vs. Committee of Creditors of

Educomp Solutions Ltd., (2022) 2 SCC 1 (para 204), to submit that a

resolution plan, once approved, is binding and irrevocable as between the

Committee of Creditors (CoC) and the Successful Resolution Applicant

(SRA). It is submitted that the sanctity and binding nature of the approved

Resolution Plan cannot be diluted by subsequent directions of the

Adjudicating Authority.

11. It is submitted that the Hon'ble Supreme Court in Committee of

Creditors of Essar Steel India Pvt. Ltd. vs. Satish Kumar Gupta &Ors.,

(2019) 16 SCC 479, has categorically held that profits generated during the

CIRP period are not to be distributed towards payment of debts of creditors

where the Resolution Plan or RFP provides otherwise. The counsel submits

that the ratio of the said judgment squarely applies to the facts of the

present case and supports the Appellant's contention that such surplus

cannot be subjected to distribution under Section 53.

12. It is further submitted that Clause 4.1(ii) of the approved Resolution

Plan governs the implementation of the Resolution Plan and provides for

transfer of control and management of the Corporate Debtor to the

Appellant as a going concern, together with all its assets, properties, cash

Company Appeal (AT) (Ins.) No. 1676 of 2025 -10-

balances, receivables, and business operations. The counsel submits that

the surplus amount, having arisen from operations of the Corporate Debtor

during CIRP, is intrinsically linked to its business and cannot be artificially

detached. By virtue of Clause 4.1(ii), the Appellant steps into the shoes of

the Corporate Debtor and becomes entitled to all benefits arising from its

operations, including any cash surplus available at the time of takeover.

13. Ld. Counsel submitted that Clause 4.1(ii) expressly provides for

extinguishment of all claims beyond what is provided in the Resolution

Plan. Therefore, any attempt to distribute the surplus to creditors dehors

the Resolution Plan would amount to reopening settled claims, which is

impermissible in law.

14. He submits that the commercial wisdom of the Committee of

Creditors is paramount and non-justiciable, as held by the Hon'ble

Supreme Court in Ghanshyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset

Reconstruction Co. Ltd., (2021) 9 SCC 657 (para 55). It is submitted that

the approval of the Resolution Plan by the CoC--including the Respondent,

who held 22.23% voting share--reflects conscious commercial decision-

making. The impugned order, by directing distribution contrary to the

Resolution Plan, undermines such commercial wisdom and is therefore

liable to be set aside.

15. It is further submitted that this Hon'ble Tribunal, in its order dated

19.03.2026 passed in SPS Steels Rolling Mills Ltd. vs. Central Bank of

India, Comp. App. (AT)(INS) No. 352 of 2024, has held that assets of the

Corporate Debtor not included in the Information Memorandum (IM),

Company Appeal (AT) (Ins.) No. 1676 of 2025 -11-

including those discovered post-approval of the Resolution Plan, remain

with the Corporate Debtor under new management and do not revert to

creditors or the CoC. The counsel submits that the said principle reinforces

that all assets and accretions, whether disclosed or undisclosed, vest with

the Resolution Applicant upon approval of the Resolution Plan.

16. In view of the above submissions, Ld. Counsel submitted that the

impugned order defeats the very object and purpose of the Insolvency and

Bankruptcy Code, 2016, which is to ensure revival of the Corporate Debtor

as a going concern and to safeguard it from further financial uncertainty.

The direction to distribute the surplus amount is contrary to the approved

Resolution Plan and settled principles of law, and therefore deserves to be

set aside.

Submissions of the Respondent- Pheonix ARC

17. Ld. Counsel for the Respondent submits that the present Appeal is

confined to a narrow and limited controversy, namely, the treatment of

surplus cash flow generated during the Corporate Insolvency Resolution

Process (CIRP) period between 01.11.2019 and 11.03.2022. It is an

admitted and undisputed factual position that the said surplus was

generated when the Corporate Debtor was being run as a going concern

under the supervision and control of the Resolution Professional. During

this entire period, the Appellant neither had control over the operations of

the Corporate Debtor, nor made any financial or operational contribution

towards the generation of such surplus. The surplus, therefore, is

Company Appeal (AT) (Ins.) No. 1676 of 2025 -12-

intrinsically linked to the CIRP operations and not to any effort or

investment by the Appellant.

18. He submits that the Resolution Plan dated 02.11.2019, which came

to be approved on 11.03.2022, is completely silent on the issue of

treatment, ownership, or appropriation of any surplus generated during the

CIRP period. The Plan strictly deals with assets and liabilities as reflected

in the Information Memorandum and is premised on fixed financial

assumptions. The surplus in question was neither anticipated nor factored

into the financial matrix of the Plan. It was not subjected to valuation, nor

was it allocated or distributed under any clause of the Plan. Thus, any

claim by the Appellant over such surplus is dehors the terms of the

Resolution Plan itself.

19. He further submits that the surplus amount in question constitutes

an accrual arising during the CIRP period and forms part of the insolvency

estate. The said surplus was generated entirely under the management and

supervision of the Resolution Professional. The Appellant had no role in the

operations of the Corporate Debtor during this period, did not assume

operational control, and did not infuse any capital. In such circumstances,

the Appellant cannot lay any claim over the surplus, as the same is not

attributable to its efforts or investment.

20. It is specifically submitted that the only provision in the Resolution

Plan, which makes a reference to surplus cash flow is Clause 3.9.8. A plain

reading of this clause reveals that it merely enables the Resolution

Professional to utilise surplus cash flow, if any, for the purpose of

Company Appeal (AT) (Ins.) No. 1676 of 2025 -13-

foreclosure of outstanding amounts, without attracting foreclosure or

prepayment charges. Importantly, the clause does not provide that such

surplus would vest in the Resolution Applicant, nor does it create any

proprietary or beneficial interest in favour of the Appellant. Therefore, the

reliance placed by the Appellant on this clause to claim entitlement over

the surplus is wholly misplaced and contrary to the plain language of the

Plan.

21. He further submitted that in the absence of any contractual

stipulation in the Resolution Plan governing the treatment of such surplus,

the statutory framework under Section 53 of the Insolvency and

Bankruptcy Code, 2016 would necessarily come into operation. The learned

Adjudicating Authority has rightly directed that the surplus be distributed

in accordance with the waterfall mechanism prescribed under Section 53,

which governs the distribution of assets forming part of the insolvency

estate. Such direction is in complete consonance with the scheme of the

Code and ensures equitable distribution among stakeholders.

22. Ld. Counsel submits that the contention of the Appellant that the

surplus amount, by virtue of being placed in a fixed deposit, acquires a

different legal character or vests in the Resolution Applicant is wholly

misconceived and untenable. The mere act of parking funds in a fixed

deposit does not alter the source, nature, or character of the funds. The

surplus remains a CIRP-period accrual forming part of the insolvency

estate. The Appellant cannot derive any legal entitlement over such funds

merely on account of the manner in which they are held or invested.

Company Appeal (AT) (Ins.) No. 1676 of 2025 -14-

23. He further submitted that the reliance placed by the Appellant on the

judgments in Essar Steel and Ghanshyam Mishra is entirely misplaced.

These judgments deal with the extinguishment of pre-CIRP claims upon

approval of a Resolution Plan and do not address the issue of treatment of

surplus generated during the CIRP period. The ratio of these decisions does

not support the proposition that such surplus automatically vests in the

Resolution Applicant. Therefore, the Appellant's reliance on these

judgments is legally unsustainable.

24. Ld. Counsel submits that in the decision of Kalyan Janata Sahakari

Bank Ltd. v. Arun Kapoor, the learned NCLT, Mumbai Bench has

categorically held that where the Resolution Plan is silent regarding the

treatment of profits generated during the CIRP period, such profits ought to

be distributed in accordance with the scheme of the Code and the

commercial framework of the Plan. It has been held that since financial

creditors bear substantial haircuts and continue to fund the assets of the

Corporate Debtor during CIRP without any assured return, it is just,

equitable, and in consonance with commercial fairness that such CIRP-

period profits ensue to the benefit of financial creditors and not the

Resolution Applicant, particularly when the Resolution Applicant acquires

the assets only after approval of the Plan.

25. He further submitted that the contention of the Appellant that the

Committee of Creditors has already been fully satisfied under the

Resolution Plan is erroneous and misconceived. The Resolution Plan settles

claims only to the extent of assets that were considered and included in the

Company Appeal (AT) (Ins.) No. 1676 of 2025 -15-

Plan. It does not extinguish statutory rights in respect of assets or accruals

which were not part of the Plan. Financial creditors have already suffered

significant haircuts in the resolution process, and permitting the Appellant

to appropriate CIRP-generated surplus would result in unjust enrichment

at the cost of such creditors.

26. It is submitted that the attempt of the Appellant to treat CIRP-

generated surplus as part of the assets of the Corporate Debtor vesting in it

is legally untenable. During the CIRP period, all assets and accruals form

part of the insolvency estate and remain under the control and custody of

the Resolution Professional. Only those assets which are expressly

transferred under the Resolution Plan vest in the Resolution Applicant. In

the present case, since the surplus was neither identified nor transferred

under the Plan, it cannot be claimed by the Appellant.

27. He further submitted that the Appellant's reliance on alleged infusion

of funds post-approval of the Resolution Plan is irrelevant for the purpose

of determining entitlement to CIRP-generated surplus. Such infusion is

merely in discharge of obligations undertaken under the Resolution Plan

and has no nexus whatsoever with the surplus generated prior to the

takeover of the Corporate Debtor by the Appellant.

28. Ld. Counsel submits that the impugned order passed by the learned

Adjudicating Authority is well within its jurisdiction under Section 60(5) of

the Code. The order ensures adherence to the statutory framework,

promotes equitable distribution among stakeholders, and upholds the

fundamental objective of value maximisation under the Code. There is no

Company Appeal (AT) (Ins.) No. 1676 of 2025 -16-

illegality or infirmity in the said order warranting interference by this

Hon'ble Tribunal.

29. In light of the aforesaid facts and submissions, Ld. Counsel for the

Respondent submits that the present Appeal is devoid of merit. The Appeal

is founded on a clear misinterpretation of the Resolution Plan, the statutory

provisions of the Code, and settled legal principles governing CIRP.

Accordingly, the present Appeal deserves to be dismissed.

Analysis and findings

30. We have heard both the parties in detail, gone through the records of

the case and written submissions filed by the parties.

31. The present Appeal raises a limited question, viz. whether the

surplus cash flow generated during the Corporate Insolvency Resolution

Process (CIRP), before the approval and implementation of the Resolution

Plan, belongs to the Successful Resolution Applicant (Appellant), or

whether it must be distributed amongst the stakeholders in accordance

with Section 53 of the Insolvency and Bankruptcy Code, 2016, as directed

by the Adjudicating Authority in its Impugned Order dated 03.09.2025.

32. At the outset, we note that certain foundational facts are not in

dispute. The Corporate Debtor was admitted into CIRP in February 2019

and continued to operate as a going concern till the approval of the

Resolution Plan on 11.03.2022. During this entire period, the affairs of the

Corporate Debtor were managed by the Resolution Professional, and not by

the Appellant. It is also an admitted position that during this CIRP period,

Company Appeal (AT) (Ins.) No. 1676 of 2025 -17-

the Corporate Debtor generated surplus operational cash flows,

approximately to the tune of Rs.1 crore to Rs.1.42 crore. These surplus

funds were generated prior to the Appellant taking over the management

and without any financial or operational contribution from the Appellant.

33. The Appellant's case is primarily based on the terms of the approved

Resolution Plan. It is contended that Clause 3.9.5 provides for vesting of all

assets of the Corporate Debtor in favour of the Resolution Applicant,

including all rights, interests, and accretions. According to the Appellant,

the surplus generated during CIRP is nothing but an "accretion" to the

assets of the Corporate Debtor and, therefore, must automatically pass to

the Appellant. It is further argued that Clause 4.1(ii) provides that upon

approval of the Resolution Plan, the Appellant takes over the Corporate

Debtor as a going concern along with all assets, including cash balances

and business operations. The Appellant has also emphasized that the

surplus amount was placed in fixed deposits and forms part of the cash

and cash equivalents of the Corporate Debtor, and therefore retains the

character of an asset. It is further contended that once a Resolution Plan is

approved under Section 31 of the Code, it becomes binding on all

stakeholders, and any direction to distribute surplus amounts would

amount to modifying the Resolution Plan, which is impermissible in law.

34. On the other hand, the Respondent has argued that the Resolution

Plan does not contain any provision dealing with the treatment or

ownership of surplus cash flow generated during CIRP. It is submitted that

such surplus was generated entirely during the CIRP period under the

Company Appeal (AT) (Ins.) No. 1676 of 2025 -18-

supervision of the Resolution Professional, and not by the Appellant.

Therefore, such surplus forms part of the insolvency estate. The

Respondent has pointed out that Clause 3.9.8 of the Resolution Plan

merely allows the Resolution Professional to utilize surplus cash flow for

foreclosure of outstanding dues and does not confer any ownership rights

on the Appellant. It is further argued that in the absence of any specific

provision in the Resolution Plan, the statutory mechanism under Section

53 must apply. The Respondent has also emphasized that financial

creditors have taken substantial haircuts under the Resolution Plan, and

allowing the Appellant to appropriate the surplus would result in unjust

enrichment.

35. A Resolution Plan is essentially a commercial arrangement based on

the assets, liabilities, and financial position of the Corporate Debtor as

known and evaluated at the time of its approval. Only those assets and

values which are identified and accounted for in the Plan can be said to

vest in the Resolution Applicant. Any value or asset which is not

contemplated, quantified, or provided for in the Plan cannot be later

claimed by way of implication.

36. We take note of the relevant clauses of the Resolution Plan which

have been relied upon by the appellant and respondent in support of their

contentions. The relevant clauses 3.9.5, 3.9.8 and 4.1 (ii) are extracted

below:

Company Appeal (AT) (Ins.) No. 1676 of 2025 -19-

"3.9.5. Release of Charge and Withdrawals

On approval of the Resolution Plan, the Financial Creditors to inform various registries maintaining credit scores of the Corporate Debtor about change in Management through CIRP and accordingly a fresh score be allotted to the Corporate Debtor.

Margin money and fixed deposit if any shall be continued to be part of the company's asset and shall not be adjusted by the lender against any outstanding dues.

4.1 Other Covenants in the Resolution Plan

(ii) Other than the claims and settlements pertaining to the Corporate Debtor that have been envisaged and set out under this Resolution Plan, no other payment or settlement, of any kind, shall be made to any other person or entity in respect of any other claims (whether or not admitted or filed or verified with the Resolution Professional) and/or any sub-judice claims and all such claims against the Corporate Debtor along with any related legal proceedings, in relation to any period prior to the Transfer Date or arising on account of acquisition of control over the Corporate Debtor by the Resolution Applicants pursuant to this Resolution Plan, shall stand irrevocably and unconditionally abated, settled and extinguished. Such extinguishment of claims shall be deemed to form an integral part of the order by the Adjudicating Authority approving the Resolution Plan and shall accordingly be binding on all the stakeholders including the Corporate Debtor, its employees, workmen, financial and operational creditors, guarantors, security providers, and other stakeholders. The treatment accorded to the persons receiving settlement under this Resolution Plan shall constitute an absolute discharge and settlement of the dues to which they pertain and shall be the full and final performance, discharge and satisfaction of all obligations relating thereto.

3.9.8. Foreclosure of Financial Creditors Resolution Professional propose to foreclose the outstanding amount at any point of time in case of any surplus cash flow generated from the business of the Corporate Debtor without any payment of foreclosure fees/prepayment charges."

[Emphasis supplied]

37. The reference to Margin Money and fixed deposit in Clause 3.9.5

relate to margin money refers to the amount contributed by CD as its share

for taking loan from bank for working capital or term loan and fixed

Company Appeal (AT) (Ins.) No. 1676 of 2025 -20-

deposits are equivalent to cash in balance sheet. This reference cannot and

does not relate to any surplus cash flow generated during the CIRP period.

It is also clear from the records that the margin money or existing fixed

deposits were not utilised for adjustment of any lenders claim and the same

has not been argued also.

38. Similarly, Clause 4.1 (ii), which governs the transfer of control and

management of the Corporate Debtor, also has to be read in the context of

implementation of the Resolution Plan and the assets forming part thereof.

The reference to takeover of the Corporate Debtor "as a going concern"

along with its assets, cash balances, and business operations cannot be

interpreted to include surplus generated during CIRP prior to such

takeover, particularly when such surplus was not part of the Resolution

Plan. Further, the submission that Clause 4.1(ii) results in extinguishment

of all claims beyond the Resolution Plan does not address the present

issue, as the question here is not of any pre-existing claim, but of

treatment of a surplus amount which was not contemplated under the Plan

at all, and therefore cannot be said to have been extinguished or

transferred by virtue of the said clause.

39. It is clear from the above that the Resolution Plan is completely silent

on the treatment of surplus cash flow generated during the CIRP period.

There is no clause which states that such surplus will vest in the

Resolution Applicant. The surplus generated during CIRP was neither

contemplated nor allocated under the Plan, and therefore cannot be

Company Appeal (AT) (Ins.) No. 1676 of 2025 -21-

brought within the scope of "accretions" merely by a broad interpretative

exercise.

40. Clause 3.9.8, on the other hand, is the only provision in the

Resolution Plan which makes any reference to surplus cash flow, and it

merely enables the Resolution Professional to utilize such surplus for

foreclosure of outstanding dues. The clause does not contain any

stipulation regarding vesting or appropriation of such surplus in favour of

the Resolution Applicant, thereby indicating that no proprietary right over

CIRP-generated surplus was intended to be created.

41. We also do not find any merit the Appellant's argument that the

surplus is an "accretion" to the assets of the Corporate Debtor convincing.

The crucial factor here is that this surplus was generated during the CIRP

period, when the Corporate Debtor was under the control of the Resolution

Professional and was being run under the oversight of CoC. The Appellant

had no role in generating this surplus, nor had it taken any operational or

financial risk during that period. Therefore, such surplus cannot be treated

as a benefit arising from the Appellant's efforts or investment. Instead, it

remains part of the value generated during CIRP for the benefit of the

insolvency process.

42. Further, the fact that the surplus amount was kept in fixed deposits

does not change its nature. The legal character of the funds depends on

how and when they were generated, not on the form in which they are held.

Since the surplus was generated during CIRP, it continues to retain its

character as part of the insolvency estate.

Company Appeal (AT) (Ins.) No. 1676 of 2025 -22-

43. We also find that the Appellant's argument that the financial

creditors have already been satisfied under the Resolution Plan is not

correct. The Resolution Plan only deals with the assets and values

considered at the time of its approval. Any additional surplus generated

during CIRP, which was not part of the Plan, cannot be said to have been

settled or extinguished.

44. Once we reach this conclusion, the next step is straightforward. The

IBC provides a clear mechanism under Section 53 for distribution of assets

forming part of the insolvency estate. In the absence of any provision in the

Resolution Plan governing the distribution of such surplus, the

Adjudicating Authority was correct in directing that it be distributed in

accordance with Section 53.

45. The appellant has relied upon several judgments of Hon'ble Supreme

Court in support of his contention. These have been examined in the

context of present factual matrix.

46. Insofar as the reliance placed on 'Ebix Singapore Pvt. Ltd. vs. CoC of

Educomp Solutions Ltd. [(2022) 2 SCC 1]' is concerned, the principle laid

down therein is that a Resolution Plan, once approved, becomes binding

and irrevocable between the Committee of Creditors and the Successful

Resolution Applicant. The emphasis of the Hon'ble Supreme Court was on

ensuring certainty and finality of the resolution process by preventing

either party from resiling from the agreed terms of the Plan. It is to be

noted that the present case does not involve any attempt to modify, revisit,

or withdraw from the approved Resolution Plan. The present issue has

Company Appeal (AT) (Ins.) No. 1676 of 2025 -23-

arisen because the Resolution Plan is silent on the treatment of surplus

cash flow generated during the CIRP period. The said surplus was neither

identified, valued, nor allocated under the Plan. Therefore, determining its

treatment does not amount to altering the Plan, but rather addressing a

situation not contemplated within it. If the Appellant's argument is

accepted, it would effectively amount to enlarging the scope of the Plan by

implication, which is contrary to the ratio in Ebix Singapore that mandates

strict adherence, only to what has been expressly agreed. Hence, the said

judgment does not assist the Appellant in claiming rights over a value that

was never part of the Resolution Plan.

47. With regard to the reliance on Committee of Creditors of 'Essar Steel India Pvt. Ltd. vs. Satish Kumar Gupta & Ors.' [(2019) 16 SCC 479], Hon'ble Supreme Court has categorically held in paragraph 68 that:

""68. The RFP issued in terms of Section 25 of the Code and consented to by ArcelorMittal and the Committee of Creditors had provided that distribution of profits made during the corporate insolvency process will not go towards payments of debts of any creditors -- see Clause 7 of the first addendum to the RFP dated 08.02.2018. On this short ground, this part of the Judgment of the NCLAT is also incorrect."

48. It is important to note that the observations therein were made in

the context of a specific contractual framework governing that resolution

process. The Hon'ble Supreme Court referred to a clause in the Request for

Proposal (RFP), which expressly stipulated that profits generated during the

CIRP would not be used towards payment of creditors. The conclusion

reached by the Court was thus based on an express contractual stipulation

Company Appeal (AT) (Ins.) No. 1676 of 2025 -24-

agreed between the parties. In the present case, no such clause exists in

the Resolution Plan or any related document. The Plan is completely silent

on the treatment of CIRP-generated surplus. Therefore, the ratio of Essar

Steel cannot be applied in isolation or in the absence of a similar

contractual provision. In fact, the absence of such a clause in the present

case strengthens the position that the surplus was not contemplated as

part of the Resolution Plan and must, therefore, be dealt with in

accordance with the statutory framework of the Code.

49. As regards the reliance on Ghanshyam Mishra & Sons Pvt. Ltd. vs.

Edelweiss Asset Reconstruction Co. Ltd. [(2021) 9 SCC 657], the principle

laid down therein is that once a Resolution Plan is approved, all claims not

forming part of the Plan stand extinguished, and the commercial wisdom of

the Committee of Creditors in approving the Plan is paramount and not

subject to judicial review. However, the present case does not involve any

question of extinguishment of claims or interference with the commercial

wisdom of the CoC. The surplus in question was never part of the

Resolution Plan and was not placed before the CoC for consideration at the

time of approval of the Plan. This judgment deals with extinguishment of

pre-CIRP claims and do not address the treatment of CIRP-generated

surplus. Thus, the reliance on Ghanshyam Mishra is misplaced in the

context of the present controversy.

50. Insofar as the reliance on the decision of this Tribunal in SPS Steels

Rolling Mills Ltd. vs. Central Bank of India (Comp. App. (AT)(INS) No. 352 of

2024, order dated 19.03.2026) is concerned, the said judgment deals with

Company Appeal (AT) (Ins.) No. 1676 of 2025 -25-

a different factual situation. In that case, the issue pertained to assets of

the Corporate Debtor, which were in existence at the time of CIRP, but were

not included in the Information Memorandum and were discovered

subsequently. The Tribunal held that such omitted or undisclosed assets

would remain with the Corporate Debtor under the new management, as

they were inherently part of the Corporate Debtor's asset base. In contrast,

the present case does not involve any pre-existing or undisclosed asset. The

surplus in question was generated during the CIRP period through the

operations of the Corporate Debtor under the control of the Resolution

Professional. It is, therefore, not an asset that existed independently and

was merely omitted from the Information Memorandum, but a value that

arose as part of the insolvency process itself. Such CIRP-generated surplus

stands on a different legal footing and forms part of the insolvency estate,

and therefore cannot be equated with omitted or subsequently discovered

assets as contemplated in SPS Steels.

51. In light of the above analysis, we find that the authorities relied upon

by the Appellant are distinguishable on facts and law and do not support

the proposition that CIRP-generated surplus, not contemplated in the

Resolution Plan, automatically vests in the Resolution Applicant. None of

the aforementioned judgments deal with a situation like the present one,

where a surplus has been generated during CIRP and the Resolution Plan

is silent on its treatment. Therefore, these judgments are distinguishable.

52. From the perspective of fairness also, we find that the Respondent's

case has merit. The financial creditors have taken significant haircuts

Company Appeal (AT) (Ins.) No. 1676 of 2025 -26-

under the Resolution Plan, and the CIRP process was sustained by them. If

the Appellant is allowed to take the entire surplus, despite not contributing

to its generation and despite it not being part of the Resolution Plan, it

would result in an unintended and unjust benefit to the Appellant at the

cost of the creditors. The objective of the Code is also to maximize value

from the resolution of the CD in the CIRP process and the decision of the

Adjudicating Authority is intended to achieve the objective of the Code.

53. We also note that the Adjudicating Authority is well within its

jurisdiction in passing the Impugned Order, as the direction to distribute

the surplus does not tantamount to modifying the Resolution Plan. The

impugned order rather addresses a situation, which was not contemplated

in the Plan, and the same has been addressed by applying the statutory

provisions of the Code.

54. In view of the above, we are of the view that the surplus cash flow

generated during the CIRP period does not belong to the Appellant and

must be treated as part of the insolvency estate. The Adjudicating Authority

has rightly directed its distribution in accordance with Section 53 of the

IBC. We find no error or infirmity in the Impugned Order dated 03.09.2025.

Accordingly, the Appeal is dismissed. Pending IA's, if any, are closed. No

order as to costs.

[Justice Ashok Bhushan) Chairperson

[Mr. Indevar Pandey] Member (Technical) SA/Pragya (LRA)

Company Appeal (AT) (Ins.) No. 1676 of 2025