NCLT has jurisdiction over contractual disputes that arise solely on ground of insolvency: Supreme Court

The National Company Law Tribunal (NCLT) has jurisdiction over contractual disputes that arise solely on account of insolvency, the Supreme Court ruled on Monday (Gujarat Urja Vikas Nigam Limit v. Amit Gupta). .When a dispute arises solely on the ground of the insolvency of the Corporate Debtor, the NCLT is empowered to adjudicate such a dispute under Section 60(5)(c) of the Insolvency and Bankruptcy Code, a Bench of Justices DY Chandrachud and MR Shah held..“Considering the text of Section 60(5)(c) and the interpretation of similar provisions in other insolvency related statutes, NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the Corporate Debtor. Merely because a duty has been imposed on the IRP or the RP, it does not mean that the jurisdiction of the NCLT is circumscribed under section 60(5)(c) of the IBC,” the judgment states..However, the NCLT and the National Company Law Appellate Tribunal (NCLAT) have to ensure that they do not usurp the legitimate jurisdiction of other courts, tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the Corporate Debtor, the Court added.The nexus with the insolvency of the Corporate Debtor must exist, the Bench underscored..The Court was hearing an appeal filed by Gujarat Urja Vikas Nigam Limited (appellant) against a judgment of the NCLAT which in turn had upheld a judgment of the NCLT.The NCLT had on August 29, 2019 stayed the termination by the appellant of its Power Purchase Agreement (PPA) with Astonfield Solar (Gujarat) Private Limited (Corporate Debtor). The order of the NCLT was passed in applications moved by the Resolution Professional of the Corporate Debtor and Exim Bank under Section 60(5) of the IBC..The appellant has assailed the order of NCLAT on two broad grounds: first, that the NCLT and NCLAT do not possess jurisdiction under the IBC to adjudicate on a contractual dispute between the appellant and the Corporate Debtor; and second, in any event, the termination of the PPA was validly made under Article 9.2.1(e) and Article 9.3.1 of the PPA..The Court held that the NCLT had jurisdiction to adjudicate the dispute and also ruled against the appellant on merits, thereby dismissing the appeal. .The court noted that in the present case, the PPA was terminated solely on the ground of insolvency, since the event of default contemplated under Article 9.2.1(e) was the commencement of insolvency proceedings against the Corporate Debtor. The court held that in the absence of the insolvency of the Corporate Debtor, there would be no ground to terminate the PPA. "The termination is not on a ground independent of the insolvency. The present dispute solely arises out of and relates to the insolvency of the Corporate Debtor", the court observed..Supreme Court also held that the Resolution professional can approach the NCLT for adjudication of disputes that are related to the insolvency resolution process, however, for adjudication of disputes that arise dehors the insolvency of the Corporate Debtor, the RP must approach the relevant competent authority. "For instance, if the dispute in the present matter related to the non-supply of electricity, the RP would not have been entitled to invoke the jurisdiction of the NCLT under the IBC. However, since the dispute in the present case has arisen solely on the ground of the insolvency of the Corporate Debtor, NCLT is empowered to adjudicate this dispute under Section 60(5)(c) of the IBC," reads the judgment. .[Read Judgment]