Companies Act • Official Statutory Text & Practice Guide
Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 2013
Section 263 of Companies Act: Corporate Governance & Statutory Compliance
Official Bare Act Text
Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary
On and from the date of the coming into operation of the sanctioned scheme or any provision thereof, the scheme or such provision shall be binding on the sick company and the transferee company or, as the case may be, the other company and also on the employees, shareholders, creditors and guarantors of the said companies.
Statutory Defined Terms in this Section:(Click any term for official legal definition)
Section 263 historically declared the binding effect of sanctioned revival schemes across all stakeholders and governments; omitted by the Insolvency and Bankruptcy Code, 2016, this statutory finality formed the basis of the binding resolution plan mandate under Section 31(1) of the IBC.
Erga Omnes Binding Statutory Authority: Provided that a sanctioned scheme became universally binding on the company, shareholders, creditors, guarantors, employees, and government authorities.
Extinguishment and Novation of Claims: Extinguished or restructured all pre-existing liabilities, contracts, and claims strictly in accordance with the terms sanctioned by the Tribunal.
Foundation of the Modern Clean Slate Rule: Omitted by the IBC, with its binding effect codified under Section 31(1) IBC, serving as the statutory bedrock for the Supreme Court's clean slate doctrine.
Key Landmark Precedents:
Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657: The Supreme Court established the 'clean slate' doctrine, holding that once a revival plan is approved under Section 31(1), all past debts and government claims not included in the plan stand permanently extinguished.
State Tax Officer v. Rainbow Papers Ltd., (2022) 13 SCC 501: Discussed the binding nature of resolution plans against statutory tax authorities holding statutory first charges.
Ajay Kumar Radheyshyam Goenka v. Tourism Finance Corp. of India Ltd., (2023) 10 SCC 545: Affirmed that while an approved plan completely binds and discharges the corporate debtor, criminal liability under Section 138 NI Act against signatory directors and personal guarantor liabilities survive.
Courtroom Practice & Strategic Litigation Guidance:
Immediately upon receipt of an NCLT approval order, serve certified copies on all municipal, state, and central tax departments with a formal notice under Section 31(1) IBC and Ghanashyam Mishra, demanding the formal withdrawal of all attachments and pre-existing tax demands.
Legal Commentary & Landmark Judgments: Section 263
Section 263 historically declared the binding effect of sanctioned revival schemes across all stakeholders and governments; omitted by the Insolvency and Bankruptcy Code, 2016, this statutory finality formed the basis of the binding resolution plan mandate under Section 31(1) of the IBC.
Immediately upon receipt of an NCLT approval order, serve certified copies on all municipal, state, and central tax departments with a formal notice under Section 31(1) IBC and Ghanashyam Mishra, demanding the formal withdrawal of all attachments and pre-existing tax demands.