TATA CONSULTANCY SERVICES LIMITED versus VISHAL GHISULAL JAIN, RESOLUTION PROFESSIONAL, SK WHEELS PRIVATE LIMITED

Citation: [2021] 10 S.C.R. 1080 · Decided: 23-11-2021 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Disposed off

cites 2 · see the full citation network in Lexace

Judgment (excerpt)

A
B
C
D
E
F
G
H
1080
SUPREME COURT REPORTS
[2021] 10 S.C.R.
   [2021] 10 S.C.R. 1080
1080
TATA CONSULTANCY SERVICES LIMITED
v.
VISHAL GHISULAL JAIN, RESOLUTION PROFESSIONAL,
SK WHEELS PRIVATE LIMITED
(Civil Appeal No. 3045 of 2020)
NOVEMBER 23, 2021
[DR. DHANANJAYA Y CHANDRACHUD
AND A. S. BOPANNA, JJ.]
Insolvency and  Bankruptcy Code 2016 – s.60(5)(c) –
Contractual dispute – Residuary jurisdiction of NCLT u/s.60(5)(c),
if can be invoked – Build Phase Facilities Agreement entered into
between appellant and respondent-Corporate Debtor, followed by
a Facilities Agreement – Corporate Debtor provided premises with
certain specifications, facilities to the appellant for conducting
examinations for educational institutions – Termination notice issued
by appellant – Ad-interim stay on the notice granted by NCLT –
Order upheld by NCLAT – On appeal, held: Appellant was availing
the services of the Corporate Debtor and was using the property
leased by it – Before the initiation of Corporate Insolvency
Resolution Process (CIRP), the appellant had on multiple instances
communicated to the Corporate Debtor that there were deficiencies
in its services and that the penalty and termination clauses of the
Facilities Agreement may be invoked – Residuary jurisdiction of
the NCLT cannot be invoked if the termination of a contract is based
on grounds unrelated to the insolvency of the Corporate Debtor –
In the present case, there is nothing to indicate that the termination
of the Facilities Agreement was motivated by the insolvency of the
Corporate Debtor – Thus, NCLT does not have any residuary
jurisdiction to entertain the present contractual dispute which arose
dehors the insolvency of the Corporate Debtor – Judgment of NCLAT
set aside – Proceedings initiated against the appellant dismissed
for absence of jurisdiction.
Insolvency and  Bankruptcy Code 2016 – s.238 – Held: s.238
provides that the IBC overrides other laws, including any instrument
having effect by virtue of law.
Insolvency and  Bankruptcy Code 2016 – ss.14, 60(5)(c) –
Held: In Gujarat Urja Vikas v. Amit Gupta & Ors. reported as 2021 (3)
A
B
C
D
E
F
G
H
1081
SCALE 776 it was held that the NCLT’s jurisdiction is not limited by
s.14 in terms of the grounds of judicial intervention envisaged under
the IBC – It can exercise its residuary jurisdiction u/s.60(5)(c) to
adjudicate on questions of law and fact that relate to or arise during
an insolvency resolution process – Further, narrow exception crafted
in Gujarat Urja must be borne in mind by the NCLT and NCLAT even
while examining prayers for interim relief – Exercise of the NCLT’s
residuary powers should be governed by the said decision - Note of
caution issued to the NCLT and NCLAT regarding interference with
a party’s contractual right to terminate a contract.
Disposing of the appeal, the Court
HELD: 1.1 Section 238 provides that the IBC overrides
other laws, including any instrument having effect by virtue of
law. Section 60(5)(c) grants residuary jurisdiction to the NCLT
to adjudicate any question of law or fact, arising out of or in relation
to the insolvency resolution of the Corporate Debtor. Clause 12
(d) of the Facilities Agreement provides that any dispute between
the parties relating to the agreement could be the subject matter
of arbitration. However, the Facilities Agreement being an
‘instrument’ under Section 238 of the IBC can be overridden by
the provisions of the IBC. The existence of a clause for referring
the dispute between parties to arbitration does not oust the
jurisdiction of the NCLT to exercise its residuary powers under
Section 60(5)(c) to adjudicate disputes relating to the insolvency
of the Corporate Debtor. [Paras 18, 21][1094-A-B; 1096-B-C,
E-G]
Indus Biotech (P) Ltd. v. Kotak India Venture (Offshore)
Fund Decision of Supreme Court dtd.26.03.2021 in
Arbitration Petition (Civil) No.48 of 2019 – relied on.
1.2 While the duty of the RP and the jurisdiction of the NCLT
cannot be conflated, in Gujarat Urja, this Court has clarified that
the RP can approach the NCLT for adjudication of disputes which
relate to the insolvency resolution process. But when the dispute
arises dehors the insolvency of the Corporate Debtor, the RP
must approach the relevant competent authority (para 72). The
NCLT in its residuary jurisdiction is empowered to stay the
termination of the agreement if it satisfies the criteria laid down
by this Court in Gujarat Urja. In any event, the intervention by
TCS LTD. v. VISHAL GHISU

Excerpt shown. Read the full judgment & AI analysis in Lexace.