Abstract

The Insolvency and Bankruptcy Code, 2016 has market a paradigm shift in Indian Insolvency regime. Prior to the advent of IBC there used to exist different statutes such as SARFAESI Act 2002, RDDBFI Act 1993 etc. These laws used to exist but there were several loopholes because of which these laws were severely criticized. The main reasons for these criticisms were, time consuming, lack of proper remedy to the creditors since they used to be debtor centric. Therefore, this was the need of the hour to introduce a law which can work in a holistic manner. Clean Slate Theory postulates that once a resolution plan is approved, the successful resolution applicant acquires the corporate debtor free from past liabilities. This article explores the origin, legal foundation, judicial interpretation, and policy rationale of the clean slate theory. It also critiques the limits of this doctrine, particularly in light of recent Supreme Court judgments and regulatory clarifications. Also, this paper delves on the harmonisation of the rights of different stakeholders involved and how the courts have helped in balancing the interest of different stakeholders. The paper concludes with recommendations for balancing creditor interests with the Code’s revival-centric goals.

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