Royzz & Co
NCLT has jurisdiction to adjudicate contractual disputes arising from insolvency of corporate debtor
The Supreme Court has held that the National Company Law Tribunal has jurisdiction to adjudicate contractual disputes, which arise solely from or which relate to the insolvency of the Corporate Debtor. In the same case, it held that a power purchase agreement cannot be terminated during the moratorium period under the Insolvency and Bankruptcy Code (IBC). For adjudication of disputes that arise dehors the insolvency of the Corporate Debtor, the RP must approach the relevant competent authority. The residuary jurisdiction of the NCLT under Section 60(5)(c) of the IBC provides it a wide discretion to adjudicate questions of law or fact arising from or in relation to the insolvency resolution proceedings.
The court also held that a buyer cannot terminate a power purchase agreement even if it contains a clause allowing such an action if an insolvency application is admitted against a power supplier. As Section 238 of the Insolvency Code states it will override the contrary provisions in any other existing law, the court observed that the resolution professional can approach insolvency tribunals for disputes that are related to insolvency resolution process. In the case, the agreement was terminated solely because of insolvency, which confers jurisdiction on NCLT to decide its validity. The Court further stated that it cannot be invoked in case of legitimate termination or when it is done on grounds that do not relate to insolvency.