NCLAT affirms NCLT's decision on maintainability under Insolvency Code

The NCLAT upheld the NCLT's decision that I.A. No. 2691 of 2022 was maintainable under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016. The NCLAT clarified that the jurisdiction of the Adjudicating Authority extends to disputes related to the insolvency of the Corporate Debtor. Additionally, the NCLAT emphasized that the issue was not about including assets of a subsidiary in the liquidation estate but rather the maintainability of the application based on the Insolvency Resolution Process of the Corporate Debtor. The appeals were dismissed, leaving the NCLT to further examine the application.

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Issues Involved:

1. Maintainability of I.A. No. 2691 of 2022 under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016.
2. Jurisdiction of the Adjudicating Authority to decide disputes unrelated to the Corporate Debtor.
3. Inclusion of assets of a subsidiary in the liquidation estate of the Corporate Debtor.

Summary:

1. Maintainability of I.A. No. 2691 of 2022 under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016:

The appeals challenge two orders passed by the National Company Law Tribunal (NCLT), Special Bench, New Delhi, which held I.A. No. 2691 of 2022 maintainable under Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016. The State Bank of India (SBI) contended that the application was not maintainable as it involved a contractual dispute between SBI and Khagaria Purnea Highway Project Limited (Khagaria), which could not be made subject to Section 60(5) of the Code. However, the NCLAT held that the application was maintainable as it arose out of or in relation to the Insolvency Resolution or Liquidation proceedings of the Corporate Debtor, Punj Lloyd Limited.

2. Jurisdiction of the Adjudicating Authority to decide disputes unrelated to the Corporate Debtor:

SBI argued that the NCLT had no jurisdiction to decide disputes unrelated to the Corporate Debtor and that the Liquidator did not have the locus to file the application. The NCLAT, referencing the Supreme Court's judgment in Gujarat Urja Vikas Nigam Limited Vs. Amit Gupta, held that NCLT has jurisdiction to adjudicate disputes that arise solely from or relate to the insolvency of the Corporate Debtor. The notice issued by SBI to Khagaria was based on the initiation of the Insolvency Resolution Process against the Corporate Debtor, thereby making the application maintainable under Section 60(5)(c).

3. Inclusion of assets of a subsidiary in the liquidation estate of the Corporate Debtor:

SBI contended that Khagaria, being a step-down subsidiary of the Corporate Debtor, its assets could not form part of the liquidation estate of the Corporate Debtor as per Section 36(4)(d) of the Code. The NCLAT clarified that the issue was not about including the assets of the subsidiary in the liquidation estate but rather the maintainability of the application. The application was based on the Insolvency Resolution Process of the Corporate Debtor, making it relevant under Section 60(5)(c).

Conclusion:

The NCLAT dismissed the appeals, upholding the NCLT's orders that the application was maintainable under Section 60(5)(c) of the Code. The NCLAT did not delve into the merits of the application, leaving it to the NCLT to examine without being influenced by any observations made in this order.

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