The residuary jurisdiction of the NCLT under Section 60(5)(c) of the IBC cannot be invoked if the termination of a contract is based on grounds unrelated to the insolvency of the Corporate Debtor – Tata Consultancy Services Ltd. Vs. Vishal Ghisulal Jain, RP, SK Wheels Pvt. Ltd. – Supreme Court

Hon’ble Supreme Court held that the residuary jurisdiction of the NCLT cannot be invoked if the termination of a contract is based on grounds unrelated to the insolvency of the Corporate Debtor. The NCLT does not have any residuary jurisdiction to entertain the present contractual dispute which has arisen dehors the insolvency of the Corporate Debtor. In the absence of jurisdiction over the dispute, the NCLT could not have imposed an ad-interim stay on the termination notice. The NCLAT has incorrectly upheld the interim order of the NCLT.
The Court further held that even if the contractual dispute arises in relation to the insolvency, a party can be restrained from terminating the contract only if it is central to the success of the CIRP. Crucially, the termination of the contract should result in the corporate death of the Corporate Debtor.
The Court also held that in any event, the intervention by the NCLT and NCLAT cannot be characterized as the re-writing of the contract between the parties. The NCLT and NCLAT are vested with the responsibility of preserving the Corporate Debtor’s survival and can intervene if an action by a third party can cut the legs out from under the CIRP.

The residuary jurisdiction of the NCLT under Section 60(5)(c) of the IBC cannot be invoked if the termination of a contract is based on grounds unrelated to the insolvency of the Corporate Debtor – Tata Consultancy Services Ltd. Vs. Vishal Ghisulal Jain, RP, SK Wheels Pvt. Ltd. – Supreme Court Read Post »