SC: NCLT can decide disputes related to insolvency of corporate debtor

New Delhi : The Supreme Court on Monday held that National Company Law Tribunal (NCLT) has jurisdiction to decide disputes in connection with the insolvency of a corporate debtor.

In a 138-page judgment, a bench of Justices D.Y. Chandrachud and M.R. Shah said: “NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the Corporate Debtor.”

However, the top court issued a note of caution to NCLT and its appellate tribunal NCLAT 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 judgment was delivered on an appeal filed by Gujarat Urja Vikas Nigam (GUVN) Ltd challenging a NCLAT order, which upheld the decision of NCLT staying the termination of Power Purchase Agreement (PPA) entered between GUVN and a firm Astonfield Solar (Gujarat) Private Limited.

The firm later went into insolvency. The top court dismissed this appeal.

The bench said the PPA was terminated solely on the ground of insolvency, and if insolvency were not there, then there would was no ground to terminate the PPA.

“Therefore, we hold that the RP (resolution professional) can approach the NCLT for adjudication of disputes that are related to the insolvency resolution process”, noted the bench. However, the court added that the RP must approach the relevant competent authority for adjudication of disputes, which arise from corporate debtor’s insolvency.

“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”, said the top court.

The bench noted the residuary jurisdiction of the NCLT under Section 60(5)(c) of the IBC provides it a wide discretion to adjudicate questions of law or fact arising from or in relation to the insolvency resolution proceedings.

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