NCLT Cannot Adjudicate Disputed Contractual Claims During Liquidation Under IBC If There Exists An Arbitration Clause: NCLAT Chennai

The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, comprising Justice Sharad Kumar Sharma (Member-Judicial) and Jatindranath Swain (Member-Technical), dismissed an appeal arising out of an order passed by the NCLT, Chennai. The tribunal observed that a liquidator under the IBC, 2016, cannot seek adjudication of a disputed contractual claim if the contract provides an arbitration clause. The tribunal held that the IBC forums are not the appropriate platform for adjudicating and recovering the dues, and the appellant must seek recourse through the mutually agreed forum. Background A contract was signed between NLC India Ltd. and LSML (India) Pvt. Ltd. for the erection, commissioning, and maintenance of wind turbines at Kaluneer Kulam, Tamil Nadu. Due to the failure on the part of the Respondent, NLC, in fulfilling their financial commitments, the appellant could not pay its creditors and suppliers, which led to the insolvency of the Corporate Debtor. Since no resolution plan was approved, the liquidation order was passed, and a liquidator was appointed. The appellant in this appeal is the second liquidator. After taking over the control of the Corporate Debtor, the appellant sent a notice to the NLC India, seeking payment of Rs. 40.98 Cr. but the respondent denied paying the same. As a result, the appellant moved the Adjudicating Authority (NCLT, Chennai). The Adjudicating Authority dismissed the petition and asked the appellant to approach the appropriate forum to recover the claims. Against the decision of the NCLT, the appellant filed an appeal before this tribunal. Contention of the Parties The appellant contended that due to non-fulfillment of contractual obligations by the respondent and the other force majeure condition, it suffered financial loss. Due to the financial issues, the Corporate Debtor failed to pay the dues of its suppliers, which resulted in the initiation of the CIRP and later on the liquidation. The respondent contended that it does not owe any debt to the Corporate Debtor as per the contractual obligations. It also highlighted that the conflict includes triable issues that cannot be summarily adjudicated under the IBC. NCLAT's Judgment The tribunal observed that the contract entered into between the parties contains the arbitration clause, which provides for the appointment of an arbitrator to resolve the dispute between the parties. It was also held that the dispute between the parties doesn't fall under the ambit of IBC since it requires consideration of facts that can only be established once the liability of the payment is established. The tribunal further opined that the Adjudicating Authority cannot be said to have committed the error because the forum under the IBC could not be abused to be resorted to as a substitute for the determination and recovery of dues. Lastly, the tribunal justified the Adjudicating Authority's decision dismissing the petition and dismissed the Company Appeal. Case Title: Amier Hamsa Ali Abbas Rawther v. NLC India Limited Case Number: Company Appeal (AT) (CH) (Ins) No. 213/2025 For Applicant: Ms. Jayanthi K Shah, Advocate For Respondent: Ms. Ancy, Advocate Bench: Justice Sharad Kumar Sharma (Member-Judicial) and Jatindranath Swain (Member-Technical) Judgment Date: 30/04/2025 Click Here To Read/Download The Order

NCLT Cannot Adjudicate Disputed Contractual Claims During Liquidation Under IBC If There Exists An Arbitration Clause: NCLAT Chennai

Mohd.Rehan Ali

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