2024 (8) TMI 1266 - Tri - Insolvency and Bankruptcy

NCLT confirms jurisdiction under Section 60(5) IBC for corporate debtor disputes, orders payment of admitted liability

NCLT Mumbai held that it has jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 to adjudicate disputes relating to corporate ... Jurisdiction to resolve dispute with regard to payment of outstanding dues, if any, by the Respondent to the Corporate Debtor - Admissibility of claims under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - recovery of admitted dues - HELD THAT:- The Respondent has candidly and unequivocally admitted in the email dated 04.06.2022 its liability to pay a sum of INR 12,36,28,455/- to the Corporate Debtor. Therefore, there is not even a semblance of dispute so far as this amount is concerned. In Gujarat Urja Vikas Nigam Ltd [2021 (3) TMI 340 - SUPREME COURT], it has been held by the Hon’ble Supreme Court that one of the important objects of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up the insolvency process. It was further observed in the aforesaid case that the non-obstante clause in Section 60(5) of the Code is designed for a purpose i.e. to ensure that NCLT alone has the jurisdiction when it comes to applications or proceedings by or against the Corporate Debtor covered by the Code, making it clear that no other forum has jurisdiction to entertain or dispose of such applications or proceedings and therefore, NCLT has jurisdiction to adjudicate disputes which arise solely from or which relate to the insolvency of the corporate debtor. If the Applicant is relegated to civil court(s) or arbitral proceedings even in respect of admitted dues, it would definitely defeat the objects of the Code and the objective of concluding the process in a time bound manner would never be possibly adhered to. Even otherwise, in the context of this case, undisputedly, the Corporate Debtor continued to render services to the Respondent despite initiation of CIRP against it and against those services, the Liquidator is seeking to realize the dues. Therefore, it cannot be said by any stretch of imagination that there is no nexus of the dues sought to be recovered or the relief(s) being claimed in the application with the insolvency/liquidation process. This application deserves to be partly-allowed directing the Respondent to pay the admitted liability of INR 12,36,28,455/- to the Applicant forthwith. For the remaining amount, permission is hereby granted to the Liquidator u/s 33(5) of the Code to initiate appropriate legal proceedings - Application allowed in part. Issues Involved:1. Admissibility of claims under Section 60(5) of the Insolvency and Bankruptcy Code, 2016.2. Jurisdiction of the National Company Law Tribunal (NCLT) to adjudicate disputes related to recovery of money during liquidation.3. Legitimacy of the Respondent's claim of liquidated damages and deductions.4. Entitlement of the Liquidator to recover admitted dues from the Respondent.Issue-wise Detailed Analysis:1. Admissibility of Claims under Section 60(5) of the Insolvency and Bankruptcy Code, 2016:The Applicant/Liquidator sought directions under Section 60(5) read with Section 35(1)(b), (d), and (n) of the Insolvency and Bankruptcy Code, 2016, for the release of outstanding dues from the Respondent. The Respondent argued that the Liquidator is attempting to circumvent the legal process for recovery of money by invoking the residuary powers of the Tribunal. The Tribunal found that the Respondent had admitted liability for INR 12,36,28,455/- in an email dated 04.06.2022, and thus, no adjudication was required for this amount. Citing the Supreme Court's decision in Gujarat Urja Vikas Nigam Ltd v/s. Amit Gupta, the Tribunal held that disputes pertaining to insolvency can be resolved under Section 60(5) of the Code, emphasizing the need for a unified and expedited insolvency process.2. Jurisdiction of the NCLT to Adjudicate Disputes Related to Recovery of Money During Liquidation:The Respondent contended that disputes over payment should be resolved through arbitration or civil court proceedings, not under the NCLT's residuary jurisdiction. However, the Tribunal emphasized that the NCLT has jurisdiction over disputes arising from or related to the insolvency of the corporate debtor, as established in Gujarat Urja Vikas Nigam Ltd. The Tribunal noted that relegating the Liquidator to civil or arbitral proceedings for admitted dues would defeat the Code's objective of a time-bound insolvency process.3. Legitimacy of the Respondent's Claim of Liquidated Damages and Deductions:The Respondent claimed liquidated damages and made deductions from the amounts due to the Corporate Debtor, arguing that the Corporate Debtor had not fulfilled contractual obligations. The Tribunal found that the Respondent's imposition of liquidated damages and deductions was not supported by the facts, as the Corporate Debtor had completed the works and the Respondent had admitted the liability for INR 12,36,28,455/-. The Tribunal dismissed the Respondent's claims as they were raised after the completion of work and lacked substantial evidence.4. Entitlement of the Liquidator to Recover Admitted Dues from the Respondent:The Tribunal concluded that the Respondent had unequivocally admitted liability for INR 12,36,28,455/-, and thus, directed the Respondent to pay this amount to the Applicant forthwith. For the remaining disputed amount, the Tribunal granted permission to the Liquidator under Section 33(5) of the Code to initiate appropriate legal proceedings. The Tribunal emphasized that driving parties to unnecessary and lengthy litigation for undisputed liabilities would be counterproductive to the objectives of the Insolvency and Bankruptcy Code.Conclusion:The application was partly allowed, directing the Respondent to pay the admitted liability of INR 12,36,28,455/- to the Applicant immediately. For the remaining disputed amount, the Liquidator was granted permission to initiate legal proceedings under Section 33(5) of the Code. The Tribunal's decision underscores the importance of a unified and expedited insolvency process, ensuring that admitted claims are settled without unnecessary delays.