Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), New Delhi, Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member), has held that the National Company Law Tribunal (NCLT) lacks jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC) to recover disputed contractual dues during liquidation proceedings. The ruling came in an appeal filed by Pooja Bahry, the liquidator of Dev Denso Power Ltd., challenging the NCLT’s order dismissing her application seeking recovery of ₹1.72 crore from Uttar Pradesh Rajkiya Nirman Nigam Ltd. (URNL) and Uttar Pradesh Power Transmission Corporation Ltd. (UPPTCL).

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Background

URNL was executing a construction project for UPPTCL and had subcontracted the construction of three power substations — at Khurja, Panwari, and Dharampur — to the corporate debtor, Dev Denso Power Ltd. Letters of Intent were executed for the projects.After the corporate debtor entered liquidation in September 2021, the liquidator issued communications to URNL demanding payment of ₹1.72 crore, asserting that the amount was reflected as recoverable in the company’s audited balance sheet and therefore formed part of the liquidation estate. When the respondents refused payment, contending that the claims were either unsubstantiated or dependent on submission of invoices and approvals, the liquidator approached the NCLT under Section 60(5) of the IBC seeking directions to deposit the amount in the liquidation account. The NCLT dismissed the application, holding that the claim was a disputed contractual matter beyond its jurisdiction, prompting the present appeal before the NCLAT.

Contentions

The appellant argued that the outstanding amount was neither contested nor subject to any contractual dispute, and hence it constituted a crystallized receivable forming part of the liquidation estate. It was contended that Section 60(5)(c) of the IBC empowers the NCLT to adjudicate questions of law or fact arising out of or in relation to liquidation, including the recovery of assets or receivables. Reliance was placed on the NCLAT’s decision in RKKR Steels Pvt. Ltd. v. Surana Industries Ltd., where it was held that a liquidator is empowered to recover outstanding dues during liquidation. The liquidator further argued that the NCLT had erred in directing her to approach an “appropriate forum” despite having jurisdiction to decide issues concerning the liquidation estate.

In response, the respondents contended that the claims were uncrystallized and disputed, as payments were subject to specific contractual compliances such as the submission of tax invoices and certification by the engineer in charge. They relied on the arbitration clause in the Letters of Intent and cited the Supreme Court’s decision in Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta (Civil Appeal No. 9241 of 2019) to assert that contractual disputes fall outside the NCLT’s purview. It was also argued that mere entries in the balance sheet of the corporate debtor did not amount to an admission of liability or a legally enforceable obligation.

Findings of the Tribunal

The Appellate Tribunal observed that the Adjudicating Authority (NCLT) had rightly concluded that its jurisdiction under Section 60(5) was limited to matters arising out of or in relation to the insolvency or liquidation proceedings of the corporate debtor. Since the claim originated from a contractual dispute governed by the Letters of Intent, it could not be adjudicated by the NCLT in summary proceedings under the IBC.

Referring to Clauses 21, 23, and 38 of the Letters of Intent, the NCLAT noted that payments were contingent upon specific contractual certifications and documentation. Clause 38 provided that any dispute between the parties would be referred to arbitration, and any related proceedings would lie before the competent court under the jurisdiction of the Allahabad High Court. The Bench further observed that the documents relied upon by the liquidator — including office memoranda and internal correspondence between URNL and UPPTCL — were only indicative of internal reconciliations and did not amount to a final admission of debt or liability. “Unilateral declaration of receivables in accounting entries did not create a legally enforceable liability,” the Tribunal held.

Citing the Supreme Court’s ruling in Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, the Bench reiterated that while Section 60(5) empowers the NCLT to adjudicate disputes arising from or relating to insolvency proceedings, it cannot “usurp the legitimate jurisdiction of other courts or tribunals” when the dispute arises dehors the insolvency process. The NCLAT also distinguished the present case from RKKR Steels Pvt. Ltd., noting that in that case the debt had been unequivocally admitted, whereas here the claim remained contingent and disputed.

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Holding that the NCLT had no jurisdiction to enforce recovery of disputed contractual dues, the Appellate Tribunal observed that the liquidator had attempted to bypass the contractual dispute resolution mechanism and “short-circuit the jurisdiction of other authorities.” The Tribunal concluded that the amounts claimed were uncrystallized contractual dues arising independently of the insolvency proceedings and therefore could not be recovered under Section 60(5) of the IBC. Accordingly, the NCLAT dismissed the appeal, upholding the NCLT’s order. However, it granted liberty to the liquidator to pursue remedies before the appropriate legal forum for recovery of the disputed amount.

Appearance

For Appellant: Mr. Abhishek Anand, Mr. Karan Kohli and Ms. Palak Kalra, Advocates. Ms. Pooja Bahry, Advocate for liquidator.

For Respondent: Mr. Rajesh Pathak and Mr. Ishank Gupta, Advocates for R1. Mr. Altab Mansoor, Advocate for R2

Cause Title: Pooja Bahry v. Uttar Pradesh Rajkiya Nirman Nigam Limited and Other

Case No: Company Appeal (AT) (Insolvency) No. 1561 of 2023

Coram: Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member)