Summary
The Court dismissed insolvency-tribunal proceedings challenging termination of a facilities contract because the dispute arose from alleged service deficiencies independently of insolvency. Section 60(5)(c) does not confer jurisdiction over every contract involving a corporate debtor. An arbitration clause does not itself exclude an otherwise competent insolvency forum, but a nexus with insolvency is essential. Even where that nexus exists, restraint of termination requires the contract’s centrality to the debtor’s survival and the resolution process.
Issues
- Whether the NCLT had residuary jurisdiction over termination based on alleged contractual defaults predating insolvency.
- When an insolvency tribunal may restrain termination of a corporate debtor’s contract.
Provisions considered
- Section 60(5)(c), Insolvency and Bankruptcy Code, 2016Residuary jurisdiction requires a nexus between the dispute and insolvency; the independent service-default dispute fell outside it. (¶¶ 21, 22, 26, 27)
- Section 238, Insolvency and Bankruptcy Code, 2016The overriding provision prevents an arbitration clause from defeating jurisdiction otherwise available under the Code, but does not supply the missing insolvency nexus. (¶¶ 18, 19, 20, 21, 27)
- Section 14, Insolvency and Bankruptcy Code, 2016The appellant was receiving services and occupying premises supplied by the debtor, rather than supplying essential services or recovering property from it; the invoked moratorium provisions did not apply. (¶ 24)
Held
- The history of complaints and warnings before CIRP showed that the asserted service breaches were not a smokescreen for termination because of insolvency. The NCLT therefore lacked jurisdiction to adjudicate this contractual dispute or stay the termination notice. (¶¶ 25, 26, 27)
- The resolution professional’s duty to preserve the debtor as a going concern does not determine the tribunal’s jurisdiction. Disputes outside insolvency must be taken to the competent forum, while an arbitration clause alone cannot oust jurisdiction over disputes genuinely connected with insolvency. (¶¶ 21, 22)
- Even for a dispute linked to insolvency, restraint of termination requires a contract central to CIRP whose loss would bring about corporate death. Mere diminution of value or a general invocation of going-concern status is insufficient; these requirements also govern interim relief. The lower tribunals had supplied no factual analysis of that centrality. (¶¶ 28, 29, 30)
Result
NCLAT judgment set aside. Proceedings against the appellant dismissed for absence of jurisdiction; appeal disposed of without costs. The Court did not adjudicate the underlying contractual merits.