Section 60(5) of the IBC grants the National Company Law Tribunal (NCLT) the jurisdiction to handle any application, proceeding, or claim related to a corporate debtor undergoing insolvency resolution or liquidation. Essentially it makes the NCLT the sole forum for all matters arising from a company’s insolvency proceedings. Section 60(5)(c) grants the NCLT jurisdiction over “any question of law or fact” arising from insolvency resolution or liquidation processes. Therefore, it consolidates jurisdiction, ensuring centralized adjudication for cases under the IBC. The main aim of this provision is to streamline insolvency resolution by designating a single forum for dispute resolution. The wide authority given to the NCLT under this section has led to debates over its applicability and boundaries.
Jurisprudence on Section 60(5): Key Trends
Courts have given clarity regarding the jurisdiction of the NCLT under section 60(5) stating that the jurisdiction is broad, but not absolute. The Supreme Court in its ambit and scope has compared Section 60(5) to Thanos Infinity Gauntlet, and ruled that matters unrelated to insolvency cannot be entertained under Section 60(5) of the IBC. Further, core matters directly related to the corporate insolvency resolution process (CIRP), liquidation, and asset distribution fall squarely within NCLT’s jurisdiction, while unrelated contractual claims are often deemed outside the scope of Section 60(5). Despite the clarity through the IBC and judicial interpretations, the NCLT’s jurisdiction often overlaps with civil courts and has led to conflicts, prompting the judiciary to define clearer boundaries.
Suggested Reading : Section 33 of IBC – Insolvency and Bankruptcy Code
Key Judicial Decisions on Section 60(5) of the IBC
Recent rulings have emphasized that NCLT must respect the limits of its jurisdiction under Section 60(5) of the IBC. The three important rulings rendered by the Supreme Court in Gujarat Urja Vikas Nigam Ltd v. Amit Gupta, Alok Kaushik v. Bhuveneshwari Ramanathan, and Tata Consultancy Services Ltd. v. Vishal Ghisulal Jain provide a clearer picture and a better understanding of section 60(5), more importantly, section 60(5)(c). In Gujarat Urja Vikas Nigam Ltd v. Amit Gupta, the Supreme Court held that NCLT/ NCLAT had correctly stayed the termination of the PPA as it would result in the corporate death of the corporate debtor.
Alok Kaushik v. Bhuveneshwari Ramanathan the court held that NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the Corporate Debtor. Further in Tata Consultancy Services Ltd. v. Vishal Ghisulal Jai, the court held that the exercise of the NCLT’s residuary power should be governed by the decision in Gujarat Urja Case. Courts have interpreted “arising out of” in Section 60(5) to mean a direct nexus with insolvency proceedings and disputes lacking a direct link to CIRP or liquidation are referred to other forums. The judicial trends indicate a growing emphasis on preventing overreach by NCLT, ensuring that it does not stray into non-insolvency matters.
Challenges in the Application of Section 60(5) of the IBC
Ambiguity in Scope:
The interpretation of “relating to insolvency” creates challenges for stakeholders and lack of legislative clarity often leads to prolonged litigation. Determining whether a particular dispute or claim sufficiently connected to the insolvency proceedings to fall under section 60(5)(c) can be complex.Â
Overlapping Jurisdictions:
There are concerns about potential overlap with other legal forums, especially when dealing with contractual disputes that may have tangential connections to the insolvency proceedings. Conflicts between NCLT, civil courts, and high courts slow down resolution processes, and ensuring harmony across judicial forums remains a significant challenge
Suggested Reading : Section 9 of IBC – Insolvency and Bankruptcy Code, 2016
Evolv$ing Jurisprudence:
While the Supreme Court has provided some interpretations, there is still a lack of detailed judicial precedent on the application of section 60(5) in specific situations, leading to uncertainty and impacting stakeholders’ confidence.
Implications for Insolvency Professionals
Insolvency professionals should ensure that cases brought before the NCLT meet the jurisdiction set out in section 60(5) of the IBC. The jurisdiction is based on the party involved rather than the subject matter of the application. Insolvency professionals have to ensure that the NCLT decides on any application or proceeding against a corporate debtor, any claim made by or against a corporate debtor, or any questions of law or fact that arise from insolency resolution or liquidation proceedings. However, it may be difficult for insolvency professionals to ensure that there are no delays in the insolvency or liquidation proceedings because of the overlapping jurisdiction of the NCLT, civil courts, and the high court.Â
The Way Forward: Policy and Legislative Suggestions
To improve the current insolvency framework and address the challenges regarding section 60(5), it is crucial to amend this provision. Amendments can help define its scope more precisely, reducing interpretational ambiguities, and establishing a definitive list of core and peripheral matters would provide clarity to stakeholders. Improving the coordination between NCLT, civil courts, and high courts can minimize jurisdictional overlaps, and digital integration and case tracking systems can enhance efficiency. Promoting judicial consistency may effectively address the jurisdictional issues because of section 60(5). Consistent judicial interpretations of Section 60(5) will foster predictability and confidence among stakeholders and training programs for judicial and insolvency professionals can facilitate better understanding.
FAQs
1. What is the purpose of Section 60(5) of the IBC?
The purpose of section 60(5) is to ensure that the NCLT alone has jurisdiction when it comes to applications or proceedings by or against the corporate debtor.
2. Can NCLT adjudicate non-insolvency matters under Section 60(5)?
No, the NCLT cannot adjudicate non-insolvency matters under section 60(5) of the IBC.
3. How do overlapping jurisdictions impact insolvency proceedings?
Under section 60(5) overlapping jurisdictions can significantly impact insolvency proceedings by creating confusion and potential delays.
4. What steps can be taken to improve the application of Section 60(5)?
To improve the application of section 60(5) steps can be taken to clarify its scope, establish clear guidelines for the NCLT on when to exercise its jurisdiction, and promote better communication between the NCLT and other courts.
Conclusion
Section 60(5) of the IBC is a critical provision empowering NCLT with jurisdiction over insolvency-related matters concerning corporate debtors, essentially giving broad jurisdiction over insolvency proceedings in India. Any matters arising during the insolvency process, including questions of priority or legal issues, must be brought before the NCLT under section 60(5). Clause (c) of section 60(5) is considered a “residuary clause” which allows the NCLT to handle any dispute arising out of or concerning insolvency proceedings, even if not explicitly mentioned elsewhere. However, its broad scope necessitates clearer definitions and judicial consistency.