Mesne Profit Claims After IBC Resolution Can Proceed Only Against Former Management: Calcutta High Court

The Calcutta High Court has recently held that proceedings to calculate mesne profits can continue only against a company's former management once a resolution plan is approved under the Insolvency and Bankruptcy Code.

Mesne profits refer to the claim arising from unlawfully occupying someone else's property. The court clarified that such proceedings cannot continue against the company itself or its new management after the resolution plan takes effect.

A division bench of Justices Debangsu Basak and Md. Shabbar Rashidi, in an order dated December 8, 2025, dismissed an appeal filed by Assam Company India Ltd., which had challenged a single judge's refusal to reject a long-pending civil suit seeking such compensation.

“In our view, therefore, the suit, so far as quantification of mesne profit, can continue as against the erstwhile management of the appellant. In the event there is any monetary liability found, the same is to be realized from the erstwhile management of the appellant,” the court observed.

The dispute arose from a civil suit filed in 2007 by Numazar Dorab Mehta and others seeking possession of immovable property and compensation for its alleged unlawful occupation by former management of ACIL. Possession was decreed in July 2011 and handed over by the company on May 12, 2019. However, proceedings to calculate the compensation remained pending before a special referee.

Meanwhile, ACIL underwent insolvency proceedings before the NCLT, Guwahati. Resolution proceedings began in October 2017, and a resolution plan was approved on September 20, 2018. 

The High Court noted that the approved resolution plan expressly recorded the pending eviction suit and the claim for compensation. While the plan barred enforcement of any claim against the company or its new management after approval, it permitted calculation of the compensation and stated that any recovery would be made from the existing management of the company.

The bench clarified that “existing management” meant the management in place prior to approval of the resolution plan. Relying on the Supreme Court's ruling in Electro Steel Ltd vs Ispat Carrier Pvt Ltd, the court reiterated that once a resolution plan is approved, all claims not forming part of the plan stand extinguished.

“It is trite law, that once a resolution plan is duly approved by the adjudicating authority under Section 31(1) of the Code of 2016, the claims as provided in the RP shall stand frozen. It will be binding on all stake holders. On the date of approval of the RP all claims which are not part of the RP shall stand extinguished,” the court said.

The court dismissed the appeal and held that no claim could be enforced against ACIL after approval of the resolution plan. It directed the respondents to pursue recovery strictly in accordance with the binding plan.