Pooja Bahry Liquidator For Dev Denso ... vs Uttar Pradesh Rajkiya Bhawan Nigam & Anr

[Arising out of the Impugned Order dated 26.09.2023 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi Bench-VI, in I.A. No. 1291/2022 in C.P. (IB) No. 81 (PB)/2019] In the matter of: Pooja Bahry Liquidator for Dev Denso Power Ltd. 59/27, Prabhat Road, New Rohtak Road, New Delhi- 110005 ...Appellant Versus

1. Uttar Pradesh Rajkiya Nirman Nigam Limited Having its Registered Address at:- Vishweshwaraiya Bhawanvibhuti Khand Gomti Nagar, Lucknow Uttar Pradesh- 226001 .... Respondent No.1 2. Uttar Pradesh Power Transmission Corporation Limited Having its Registered Address at:- Shakti Bhawan, 14-A, Ashok Marg, Lucknow, Uttar Pradesh- 226001 .... Respondent No.2 Present:

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. JUDGMENT

(Hybrid Mode)

Per: Barun Mitra, Member (Technical)

The present appeal filed under Section 61(1) of Insolvency and Bankruptcy

Code 2016 ('IBC' in short) by the Appellant arises out of the Order dated

26.09.2023 (hereinafter referred to as 'Impugned Order') passed by the

Adjudicating Authority (National Company Law Tribunal, New Delhi Bench-VI)

in I.A. No. 1291/2022 in C.P. (IB) No. 81(PB)/2019. By the impugned order, the

Adjudicating Authority has dismissed IA No. 1291 of 2022 filed by the Appellant-

Liquidator seeking directions against Respondent No.1 and 2 to recover certain

dues from them as payable to the Corporate Debtor. Aggrieved by the impugned

order, the present appeal has been preferred by the Appellant.

2. Giving a brief snapshot of the matter at hand, Shri Abhishek Anand, Ld.

Advocate for Appellant submitted that Respondent No.1-Uttar Pradesh Rajakiya

Nirman Nigam Ltd. ("URNL" in short) had been awarded the project for

construction of sub-stations by Respondent No.2-Uttar Pradesh Power

Transmission Corporation Ltd. ("UTCL" in short). In turn the Respondent No.1-

URNL had sub-contracted the work to the Corporate Debtor-Dev Denso Power

Ltd. for which they entered into Letters of Intent ("LoI" in short) for construction

of power sub-stations at Khurja, Panwari and Dharampur. The Corporate

Debtor was admitted into the rigours of Corporate Insolvency Resolution Process

("CIRP" in short) on 11.06.2019 and eventually on 06.09.2021, liquidation

proceedings were initiated against the Corporate Debtor and the Appellant was

appointed the Liquidator. The Appellant informed the Respondent No.1 on

16.09.2021 to pay up an outstanding recoverable amount payable to them for

Page 2 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023 completing the execution of the power sub-station projects as an amount of Rs

172.58 lakhs was reflected in the audited balance sheet of the Corporate Debtor.

On 17.02.2022, the Appellant-Liquidator reiterated before the Respondent No.1

that the three projects had been successfully handed over to them by the

Corporate Debtor and that an amount of Rs 150.79 lakhs was outstanding for

Dharampur and Panwari project and Rs 15.90 lakh for the Khurja project. Since

this outstanding amount had crystallized and the amount was also admitted by

Respondent No.1, the same be paid up to be added to the liquidation estate of

the Corporate Debtor. The Respondent No.1 however contended that there were

no pending bills for Khurja project and payment for the Dharampur project was

contingent on submission of tax invoices by the Appellant and subject to their

receiving funds from Respondent No.2. The Appellant informed the Respondent

No.1 that they cannot raise the issue of unavailability of old tax invoices to deny

the payment. Furthermore, in terms of the LoI, the payment was not contingent

or conditional on Respondent No.1 receiving funds from Respondent No.2 and

hence this cannot be a tenable ground for non-payment. On 17.03.2022 the

Appellant filed IA No. 1291 of 2022 before the Adjudicating Authority seeking

directions to be issued to Respondent No.1 to deposit Rs 172.58 lakh into the

liquidation account of the Corporate Debtor. The Adjudicating Authority

dismissed the IA No. 1291 of 2022 directing the Appellant-Liquidator to approach

an appropriate forum to recover their dues from the Respondents. Aggrieved by

the impugned order the present Appeal has been preferred by the Appellant.

3. Submission was pressed by the Appellant that the statutory provisions of

IBC read with IBBI (Liquidation Process) Regulations, 2016 ("LPR" in short)

mandated the Liquidator to take all necessary steps to protect and preserve the Page 3 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023 assets of the liquidation estate to prevent diminution in value. It was

emphatically asserted that since the audited balance sheet of the Corporate

Debtor reflected an outstanding receivable of Rs 172.58 lakh, such an entry in

the balance sheet, in law, is a binding acknowledgement of liability on the part

of the Respondents to pay. Further this amply substantiated that the

outstanding amount stood crystallized and such outstanding receivables

automatically form part of the liquidation estate and therefore recoverable by the

Liquidator for the benefit of stakeholders. Since the Liquidator was duty bound

to take requisite steps for recovery of legally enforceable claim qua the

Respondents No.1 and 2 and payments for the same was not forthcoming, I.A.

No. 1291 of 2022 was filed by the Appellant-Liquidator before the Adjudicating

Authority towards recovery of amounts which was due and payable to the

Corporate Debtor under liquidation. Since the recovery directly related to the

liquidation estate and distribution of liquidation proceedings to stakeholders,

the Adjudicating Authority enjoyed full jurisdiction to adjudicate on the said I.A.

and could not have absolved themselves from exercising their jurisdictional

powers. Hence, the dismissal of I.A. No. 1291of 2022 by the Adjudicating

Authority on grounds of lack of jurisdiction is erroneous.

4. Advancing their arguments further, it was submitted that when the

outstanding debt amount was not contested nor any contractual dispute raised,

this amount clearly formed part of the liquidation estate. Hence its recovery fell

within the jurisdiction of the Adjudicating Authority which ought to have

adjudicated IA No. 1291 of 2022 on merits. Assailing the impugned order,

submission was pressed by the Appellant that the Adjudicating Authority had

erroneously ordered the Liquidator to approach an appropriate forum to recover Page 4 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023 the dues from the Respondents at a time when Section 60(5)(c) of the IBC

categorically empowers the Adjudicating Authority to decide "any question of

priorities or any question of law or facts, arising out of or in relation to the

insolvency resolution or liquidation proceedings of the Corporate Debtor." In

support of their contention, attention was adverted to the judgment of this

Tribunal in RKKR Steels Pvt. Ltd. Vs Surana Industries Ltd. in CA(AT)(Ins)

No. 473 of 2020 in which it has been held that the Liquidator is empowered to

recover the outstanding dues including legally enforceable and duly admitted

claims by filing necessary application before the Adjudicating Authority. The

impugned order directing the Liquidator to take recourse to alternative legal

remedies to recover their admitted receivables would undermine the objectives

of IBC as it would lead to prolonging the recovery of liquidation estate assets.

5. Refuting the contentions raised by the Appellant, Shri Rajesh Pathak, Ld.

Advocate representing Respondent No.1-URNL submitted that the Adjudicating

Authority had correctly dismissed IA No. 1921 of 2022 since the Adjudicating

Authority cannot expand its jurisdiction by adjudicating upon disputed

contractual claims. In the present factual matrix, the claims raised by the

Appellant still remained uncrystallized and unadmitted rendering them legally

unenforceable. It was vehemently contended that mere entries in the books of

accounts of the Corporate Debtor cannot become a legal obligation of the

Respondents to pay up especially when the liability to pay stood disputed and

this dispute remained unadjudicated. It was submitted that in terms of the LoI,

any dispute which arose between the parties was required to be referred to

arbitration. However, the Appellant neither invoked arbitration nor instituted an

appropriate application in accordance with law. Hence, in the facts of the present Page 5 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023 case where the liabilities are yet contingent and disputed, the resolution of the

disputes have to be sorted out by taking recourse to agreed-upon mechanisms

charted out in the LoI. Since the claim of the Appellant was clearly not

maintainable, the Adjudicating Authority had therefore correctly relied on the

judgement of the Hon'ble Supreme Court in Gujarat Urja Vikas Nigam Ltd. Vs

Amit Gupta in Civil Appeal No. 9241 of 2019 case to hold that since this was

a case of contractual dispute it was required to be adjudicated in an appropriate

forum.

6. Making his submissions, Mr. Altab Mansoor, Ld. Advocate for Respondent

No.2 submitted that Respondent No.2 having no privity of contract with the

Appellant, no liability can be fastened on them by the Appellant. Further,

echoing the contention raised by Respondent No.1, it was submitted that since

the claim of the Appellant is a disputed one, the same cannot be enforced by the

Adjudicating Authority in exercise of its jurisdiction under Section 60(5) of the

IBC. Since the Appellant has not produced any concrete evidence to buttress the

fact that the claims made by them had crystallized and was unequivocally

admitted by the Respondents, the Adjudicating Authority had rightly held the

claim being a disputed contractual due, the same cannot be decided by the

Adjudicating Authority in exercise of their summary jurisdiction.

7. We have duly considered the arguments advanced by the Learned Counsel

for the parties and perused the records carefully.

8. The short point before us for our consideration is whether in the facts of

the present case, the Adjudicating Authority committed any error in not

exercising its enabling jurisdiction under Section 60(5) of the IBC to pass

directions on the recovery of the purported amounts claimed by the Liquidator Page 6 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023 on behalf of the Corporate Debtor which amounts have been disputed by

Respondent Nos.1 and 2.

9. It is the case of the Appellant that she filed her application before the

Adjudicating Authority in exercise of the powers conferred on the Liquidator

under Sections 35 of the IBC. It was emphatically asserted that Section 35 of the

IBC makes it a statutory duty for the Liquidator to take control of all assets,

property, effects and actionable claims of the Corporate Debtor. The Liquidator

is empowered to recover not only assets standing in the name of the Corporate

Debtor but also every property, right or benefit or claim which accrues in

connection with the liquidation estate. Elaborating further it was stated that the

term "property" as defined in Section 2(27) of the IBC includes both money as

well as actionable claims. It was also submitted that Section 36 of the IBC

provides that the Liquidator shall form the liquidation estate and hold the same

for the benefit of all stakeholders and shall include any assets over which the

Corporate Debtor has ownership rights including all rights and interests as

evidenced in the balance sheet of the Corporate Debtor. Regulation 39 of LPR

also reinforces the duty of the Liquidator to take all necessary steps to protect

and preserve the assets of the liquidation estate. Thus, filing of IA No. 1921 of

2022 to secure recovery of the outstanding receivables from the Respondents by

invoking the jurisdiction of the Adjudicating Authority fell very much within the

scope of the powers, duties and responsibility to be exercised by the Liquidator.

However, the Adjudicating Authority without taking cognisance that the due

claimed on behalf of the Corporate Debtor stood admitted mistakenly proceeded

to reject the application merely on the ground that the Adjudicating Authority

Page 7 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023 did not have the jurisdiction to look into this aspect under Section 60(5) of the

IBC.

10. Per contra it is the contention of the Respondents that Section 35(1)(b) of

the IBC does not authorize the Liquidator to enforce disputed receivables directly

without pursuing the disputed claims before the appropriate forum of law. This

statutory provision is applicable only in situations when the recoveries asserted

by the Liquidator are legally enforceable and backed by valid documents. The

present stand taken by the Liquidator to directly enforce contested receivables

bypassing the contractual remedies of arbitration/civil proceedings is not

tenable. The IBC provides for the Liquidator to institute or defend suits and other

legal proceedings on behalf of the Corporate Debtor and it is therefore open to

the Liquidator to approach the appropriate forum for redressal of their purported

unmet claims which are provisional in nature and yet uncrystallised. It has been

contended that the Adjudicating Authority has therefore correctly applied the

Gujarat Urja judgment which sets out with the boundaries within which the

Adjudicating Authority can exercise their jurisdiction under Section 60(5) of the

IBC and proceeded to reject I.A. No 1291 0f 2022.

11. At this stage we may capture the essence of the findings of the

Adjudicating Authority as spelt out in the impugned order. The Adjudicating

Authority at para 6 of the impugned order has observed that the jurisdiction of

the Adjudicating Authority in the context of Section 60(5) of the IBC is limited

as the amount claimed by the Liquidator arises out of the contractual agreement

between the parties "which is outside the purview of the jurisdiction of this

Tribunal". It has further held at para 8 of the impugned order that the

Respondents having raised disputes with regard to the amount which is due and Page 8 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023 payable, the adjudication of the said dispute so raised would require calling for

evidence and as such cannot be proceeded under the provisions of IBC. The

Adjudicating Authority has therefore correctly refused to interfere in the matter

while giving the liberty to the Liquidator to approach an appropriate forum to

recover the purported dues from the Respondents.

12. To arrive at our findings on the tenability of the conclusions reached by

the Adjudicating Authority for not exercising its enabling jurisdiction under

Section 60(5) of the IBC, we may first notice the terms of the LOI which governed

the transaction between the parties. Clause 21 Form A Certificate and Clause

23 Form B certificate of the terms of payment clearly mandates the need of

certification of the Engineer and need of contractor's invoice besides

confirmation of dispatch and delivery of the whole material at the place fixed for

delivery to be followed by check at the site of the work alongwith complete

documentation. Further Clause 38 Form A provides that whether before or

during the progress or after the completion of the contract, any question of

difference or dispute shall be referred for adjudication to the Chairman U.P.

Power Transmission Corporation Limited or to any other person nominated by

him in this behalf and his decision in writing shall be final, binding and

conclusive and this shall be deemed to be a submission to arbitration within the

meaning of the Indian Arbitration Act, 1940 or any statutory modification

thereof. Further, Clause 38-A provides that any action taken or proceedings

initiated on any of the terms of this agreement shall be the court of competent

jurisdiction under the High Court of Judicature at Allahabad. The above Clauses

and Forms have been outlined in the Reply Affidavit filed by Respondent No.1

and the terms of agreement have not been contested by any of the parties. Page 9 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023

13. Having perused the pleadings of the Appellant and heard their

contentions, it is one of their principal limbs of argument that the very fact that

the audited balance sheet of the Corporate Debtor reflected dues of Rs 172.58

lakhs, this amount of outstanding receivables formed part of the liquidation

estate and hence it was the duty of the Appellant to claim recovery of the said

amount. It was also submitted that UPCL-Respondent No.2 had confirmed that

they had already released the payments to URNL-Respondent No.1. The Office

Memorandum (OM) of UPCL-Respondent No. 1 dated 09.10.2018 when read with

letters addressed by URNL-Respondent No.1 on 18.07.2019, 20.12.2019,

16.11.2021 and 28.03.2022 evidences payment made to Respondent No.1 by

Respondent No.2. When Respondent No. 1 had already received the payment

from Respondent No.2, the amount had crystallised and had become recoverable

by the Liquidator.

14. This brings us to the other related argument canvassed by the Appellant

that once a Corporate Debtor has been ordered to undergo liquidation

proceedings, the appropriate forum for adjudication of all disputes shall be the

Adjudicating Authority. It was also asserted that in terms of Section 60(5) of the

IBC, the Adjudicating Authority is the competent authority to entertain or

dispose of any application or proceeding by or against the Corporate Debtor and

any claim made by or against the Corporate Debtor. It was asserted that it was

erroneous to fall back on Clause 38 of Form-A to justify the need to enter into

arbitration in case of any dispute arising between the parties. It was also

asserted that since the Corporate Debtor was undergoing liquidation, Clause 38

could not have been invoked since during the liquidation proceedings, no suit or

other legal proceedings could have been initiated by or against the Corporate Page 10 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023 Debtor in terms of Section 33 of the IBC. Further, Section 63 of IBC also specifies

that Civil Court will not have any jurisdiction to entertain a suit or proceeding

in respect of which NCLT has jurisdiction under IBC. We also notice the

averment made by the Appellant that the Respondent No.1 had categorically

admitted the outstanding amount of Rs 150.79 lakhs in their communication

dated 18.07.2019. Basis this admission, the amount had already been reflected

as "receivables" in the audited balance sheet of the Corporate Debtor. Referring

the matter for arbitration is therefore not legally tenable particularly so when

the Corporate Debtor is under liquidation proceedings. Hence, the any dispute

surrounding the present receivable amount cannot be referred to arbitration as

it would violate the statutory framework of IBC.

15. Submission has also been made that the Adjudicating Authority had

wrongly relied on the judgment of the Hon'ble Supreme Court in Gujarat Urja

and of this Tribunal in Ramachandra D. Choudhary, RP Vs Bansal Trading

Company in CA(AT)(Ins) No. 810-812 & 815 of 2020 in holding that the

Adjudicating Authority lacked jurisdiction to entertain IA No. 1291 of 2022. The

outstanding amounts not being contingent or disputed, it squarely fell within

the purview and jurisdiction of the Adjudicating Authority under Section 60(5)(c)

of the IBC to order recovery of the same. It is contended that in Gujarat Urja

judgment, the Hon'ble Apex Court held that contractual disputes fall outside

the insolvency framework and hence it is required to be pursued before the

appropriate form of law. Similarly, in the Bansal Trading judgment, it was a

case involving adjudication of disputed debts raised by sundry debtors which

could not have been adjudicated in a summary manner under Section 60(5) of

Page 11 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023 IBC. On the contrary, in the present case, it was contended that the liability is

a crystallized liability which has also been admitted by the Respondents.

16. Coming to our analysis and findings, we find that the amount claimed to

be recoverable from the Respondents by the Appellant as part of the liquidation

asset in terms of project wise dues was Rs 89.12 lakh; Rs 15.90 lakh and Rs

59.17 lakh alongwith interest @ 18% p.a. in respect of sub-stations at

Dharampur, Khurja and Panwari respectively.

17. When we look at the material placed on record, we find that the

Respondent No.1 has contended that in respect of Khurja project, a sum of Rs

15 lakh which was claimed by them related to unapproved variation from the

project and that these payments were contingent upon receiving approval of

Respondent No.2 in respect of the variations. This does not tantamount to

acknowledgement of any pending or crystallized dues payable to the Corporate

Debtor. In any case, no final bills had been submitted for the Khurja project and

recoverable amount being provisional in nature cannot be treated as final

admission of debt.

18. As for the Panwari project, though the accounts were settled and an

amount of Rs 50.61 lakh was payable, the payment conditions laid down in

Clause 2.10 of the LOI remained unmet which included submission of Engineer's

Certificate of completion; detailed invoice with supporting tax documentation

etc. Though the amount was reconciled but payment was subject to satisfying

contract compliances which compliances had not yet been fulfilled. Thus, the

debts in respect of Panwari project were not ripe for recovery.

19. Coming to the Dharampur project, it is the contention of the Appellant

that the OM dated 09.10.2018 clearly provided that Rs 91.62 lakh was due to Page 12 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023 be released to Respondent No.1 by Respondent No.2 and therefore constituted

an admission on the part of Respondents of their liability. It may be useful to

peruse the said OM which reads as follows:

"Hence Rs.91.62 lakhs due to be released against construction of 132 KV Dharampur (Bulandshahr) is hereby adjusted against the excess payment of Rs 1086.41 lakh released for construction of 220 kv Motiram Adda (Gorakhpur) after this adjustment the excess payment left shall be (960.94- 91.62= 869.32 lakh)"

When we look at the above OM excerpts, clearly the above OM talks of release

due of Rs 91.62 lakhs but was accompanied by the rider that this amount was

to be adjusted against certain excess payment of Rs 1086.41 lakhs already

released for construction of another project. This is undoubtedly a case where

an issue of excess payment and adjustment/appropriation of the excess

payment was involved.

20. Besides the fact that the said OM was not addressed to the Appellant, even

the letters dated 18.07.2019, 20.12.2019, 16.11.2021 and 28.03.2022 which

have been adverted attention to by the Appellant to claim that the debt had

crystallised are in the nature of internal communications between the

Respondents No.1 and 2 as Respondent No.1 was awarded multiple projects by

Respondent No.2 other than the three sub-stations in question. At this stage it

may be useful to notice one such communication dated 18.07.2019 which is as

reproduced hereunder:

Date: 18.07.2019 To The Chief Engineer (Project & Purchase) UP Power Transmission Corporation Ltd.

Subject :- Regarding Delayed Payment of 132/33 K.V. Electric Sub station Dharampur Bulandshahar and Panwari Mahoba

Page 13 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023 Reference: Ms. Pooja Bahry's letter dated 27.06.2019 Sir.

Please take reference of Ms. Pooja Bahry's notice dated 27th June, 2019 (photocopy enclosed) vide which it is referred that the payment of Sub-Contractors' pending bills could not be done by the Nirman Nigam due to shortage of funds. We wish to inform that that due to non-payment of the above bills, the concerned contractors have applied for payment of pending amount through National Company Law Tribunal (NCLT), Principal Bench, New Delhi under Insolvency and Bankruptcy Code, 2016.

In the above context it is requested that the pending payments detailed as per column no.10 in the enclosed sheet pertaining to the above mentioned electric Sub-Stations aggregating Rs.150.79 Lacs may please be released so as to enable the Corporation to make payment of the pending bills to the concerned Sub-Contractors. With thanks.

Yours faithfully.

General Manager (Fin.)

21. In our considered view, basis such internal reconciliation notes regarding

project wise excess payments and adjustments to be made across unrelated

projects, it would be misplaced to hold these communications as an admission

of liability on the part of the Respondents qua the Appellant. The OM and the

letters at best are mere approximation and estimation of accounts without the

stamp and seal of verification and final conciliation of the accounts and therefore

the reliance placed on them by the Appellant to claim that the outstanding

amount qua them had crystallised is not tenable. In view of the above findings,

we are also of the view that the ratio of the RKKR Steels judgment does not

support the submission made by the Appellant as in that case the debt was

unequivocally admitted, quantified and supported by documents while the

present case is one characterized by pending final bills, unresolved variation

approvals, excess payments unadjusted and reconciled amounts requiring

documentary compliances.

Page 14 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023

22. We now advert our attention to the judgement of the Hon'ble Supreme

Court in Gujarat Urja judgement which has dilated at length on the contours

and amplitude of Section 60(5). We may notice the relevant findings of this

judgement which is as under:

"42. The primary issue upon which the outcome of this appeal would turn is the nature of the jurisdiction which is exercised by the NCLT under Section 60(5) of the IBC. The provision reads thus:

(5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of -

(a) any application or proceeding by or against the corporate debtor or corporate person;

(b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and

(c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code.

67.........Therefore, considering the text of Section 60(5)(c) and the interpretation of similar provisions in other insolvency related statutes, NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the Corporate Debtor. However, in doing do, we issue a note of caution to the NCLT and NCLAT to ensure that they do not usurp the legitimate jurisdiction of other courts, tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the Corporate Debtor. The nexus with the insolvency of the Corporate Debtor must exist.

72.Therefore, we hold that the RP can approach the NCLT for adjudication of disputes that are related to the insolvency resolution process. However, for adjudication of disputes that arise dehors the insolvency of the Corporate Debtor, the RP must approach the relevant competent authority. For instance, if the dispute in the present matter related to the non-supply of electricity, the RP would not have been entitled to invoke the jurisdiction of the NCLT under the IBC. However, since the dispute in the present case has arisen solely on the ground of the insolvency of the Corporate Debtor, NCLT is empowered to adjudicate this dispute under Section 60(5)(c) of the IBC."

Page 15 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023

23. In summary, the jurisprudence laid down by this judgement is clear that

the Hon'ble Apex Court after examining in details the use of expressions "arising

out of" and "in relation to" in Section 60(5) of the IBC has held that NCLT cannot

exercise its jurisdiction over matters dehors the insolvency proceedings since

such matters would fall outside the realm of IBC. While the duty of the

Resolution Professional and the jurisdiction of the NCLT cannot be conflated, it

was clarified that the Resolution Professional 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

Resolution Professional must approach the relevant competent authority.

24. We have already noticed that the Clauses in the LOI clearly stated that the

entire transaction shall be governed with the terms and conditions laid down in

Form-A and B of Clauses 21 and 23. Payment of bills was subject to terms and

conditions of LOI and the related agreements. Unilateral declaration of

"receivables" in accounting entries did not create a legally enforceable liability.

In such circumstances, mere entries in the balance sheet of the Corporate

Debtor were not sufficient to foist a legally enforceable claim on the Respondents

devoid of any substantiation of the same with necessary proof and evidence.

Further Clause 38 Form-A clearly provided for arbitration in case of disputes

between the parties. Additionally, Clause 38 of the same Form-A provided that

any action taken or proceeding initiated on any of the terms of the agreement

shall lie within the jurisdiction of the High Court at Allahabad.

25. In the absence of a legally adjudicated or admitted claim, as in the facts of

the present case, we are guided by the judicial precedent laid down in Gujarat

Urja judgment and are of the considered view that the Adjudicating Authority Page 16 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023 stood precluded from ordering recovery of claim amount as sought by the

Appellant-Liquidator in exercise of Section 60(5) of the IBC. The Liquidator has

clearly endeavoured to sidestep and short-circuit the jurisdiction of other

authorities and has approached the Adjudicating Authority for the enforcement

of the uncrystallized dues of the Corporate Debtor. The trajectory of events

makes it clear that insolvency of the Corporate Debtor was not being employed

as a ground by the Respondents for not making the payment but the payment

was denied on account of contractual disputes surrounding uncrystallised debt

which had arisen dehors the insolvency of the Corporate Debtor. In the absence

of jurisdiction over the dispute, the Adjudicating Authority has rightly not

allowed the prayers of the Liquidator.

26. For the aforesaid reasons stated above, there is no illegality or infirmity in

the impugned order passed by the Adjudicating Authority. The impugned order

does not need any intervention. The Appeal fails and is dismissed. The

Appellant-Liquidator however shall have the liberty to take appropriate steps to

file legal proceedings with regard to the contractual dispute and we make it clear

that we are not expressing any opinion with regard to the merits of the

contractual dispute. No order as to costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

Place: New Delhi Date: 15.10.2025 Abdul/Harleen

Page 17 of 17 Company Appeal (AT) (Insolvency) No. 1561 of 2023