An application against termination of contract for essential raw material supply to Corporate Debtor (not a going concern) is not maintainable under Section 60(5)(c) of the IBC, 2016 (residuary jurisdiction) – Sundaresh Bhat RP of JBF Petrochemicals Ltd. Vs. Mangalore Refinery and Petrochemicals Ltd. – NCLT Ahmedabad Bench
In this case, the Respondent informed the Corporate Debtor that since the Corporate Debtor has committed default in buying Paraxylene (Px) and there has been no off –take continuously for three months, the agreement dated 12.04.2016 stands terminated. The RP’s prayer is to direct the Respondent to supply Paraxylene (“Px”) as and when the plant is ready and commissioned.
The Adjudicating Authority held that Paraxylene (“Px”) is essential raw material to be used in the products of Petrochemical Industry so as to make such industry functional. However, in this case, the Corporate Debtor, being in Petrochemical Industry has never been functional at all. Section 14(2A) of IBC, 2016 is to be pressed in service to preserve the status of the Corporate Debtor as a going concern. In this case the Corporate Debtor was never a running unit. It cannot be said that by the termination of the agreement by the Respondent, the Corporate Debtor suffered any erosion of assets during the CIRP.