Contributed by Nidhi Kamath

Introduction

Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC) is a section that has been open to wide interpretations by the court and time and again has evolved to have the broadest interpretation possible. The National Company Law Tribunal’s (NCLT) authority is principally established under Section 60 (5) of the Insolvency and Bankruptcy Code, 2016. The NCLT is given a broad scope to exercise its jurisdiction. A verbatim reading of Section 60(5) states as below:

(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.

In this analytical piece of writing, we shall be discussing how the courts have played a pivotal role in the interpretation of this particular provision which happens to be the heart and soul of the whole law.

Scope and Judicial Interpretation

The institutional architecture outlined in the IBC aimed to create a unified platform to handle insolvency cases that were previously spread across various channels. The National Company Law Tribunal (NCLT) has the authority to resolve conflicts that emerge exclusively from or are connected to the financial failure of the company in question. Through this verdict of  Gujarat Urja Vikas Nigam Ltd. v. Gujarat Electricity Regulatory Commission, the importance of NCLT was highlighted and placed in the limelight to emphasize the point that the code is in close correlation to the Company Law Tribunal.

The presence of a mechanism for addressing complaints under the Insolvency and Bankruptcy Code (IBC) against an insolvency professional does not deprive the National Company Law Tribunal (NCLT) of its authority under Section 60(5)(c) of the IBC.  Further, the Supreme Court in the case of Alok Kaushik v. Bhuvaneshwari Ramanathan has highlighted that the mere presence of an alternative redressal mechanism does not exhaust one’s remedy to approach the NCLT.

The Supreme Court in the case of ArcelorMittal India (P) Ltd. v. Satish Kumar Gupta examined the extent of Section 60(5) in its entirety, not just Section 60(5)(c), and concluded that the non-obstante clause in Section 60(5) is intended to establish the exclusive jurisdiction of the NCLT in dealing with applications and proceedings involving a corporate debtor under the Code. This clarifies that no other forum has the authority to hear or resolve such applications or proceedings. Through this case law, complete jurisdiction was vested within the powers of NCLT to adjudicate issues including corporate debtors under IBC.

The Appellants contention in was that either the liquidator or the RP can make an application to the Adjudicating Authority for guidance on avoiding such transactions. The Supreme Court in the case of Anamika Singh v. Shinhan Bank ruled that according to Section 60(5) of the IBC, the Adjudicating Authority has the power to consider and resolve any application or legal action involving the Corporate Debtor or Corporate persons.

Section 60(5)(c) of the IBC encompasses all matters pertaining to legal or factual enquiries. Upon careful examination of the provision, it becomes evident that enquiries pertaining to law or facts should specifically relate to ongoing actions before the NCLT, and they should be directly connected to the resolution or liquidation processes. This judgment of Insolvency & Bankruptcy Board of India v. SBI laid clear emphasis on the interpretation of sub-clause c of clause 5 of Section 60 which states that any question of law or fact should also be covered in the ambit of this section.

SC held that the meaning of the expressions “arising out of,” “about,” and “any question of priorities or any other question whatsoever” is- The interpretation of statutory language in one law cannot always be applied to a different law. Instead, the words of a statute must be understood in a way that makes sense and aligns with the overall purpose and context of the law in the case of Gujarat Urja Vikas Nigam Limited v. Gujarat Electricity Regulatory Commission.

During the interpretation of the sub-clause c, in the case of Directorate of Enforcement v. Manoj Kumar Agarwal, it was held that if an obstacle is being caused by the attachment or by assuming control of the possession, it would involve a matter of precedence arising from the insolvency resolution or liquidation proceedings of the Corporate Debtor. Such a matter can be resolved by the Adjudicating Authority under Section 60(5)(c) of the Insolvency and Bankruptcy Code (IBC). The question as to what falls in the ambit of ‘question of priority’ was clarified in this verdict.

The Supreme Court deliberated on the residual jurisdiction of the National Company Law Tribunal (NCLT) in the case of Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta as outlined in Section 60 (5)(c). The precedent established that the NCLT has the residual jurisdiction to resolve disputes that arise from or are connected to the insolvency procedures of a corporate debtor, as per the legislation. NCLT was vested with residuary power in certain disputes as prescribed by this verdict.

Further, on more deliberation of Section 60(5) by the court in the case of Committee of Creditors of Metalyst Forging Ltd. v. Consortium of Deccan Value Investors LP and DVI PE (Mauritius) Ltd has contributed to the observation that the non-obstante clause in Section 60(5) serves the specific purpose of granting exclusive jurisdiction to the NCLT for applications and proceedings involving a corporate debtor under the Code. It explicitly states that no other forum has the authority to handle or resolve such applications or proceedings.

The powers of the National Company Law Tribunal (NCLT) as an Adjudicating Authority under Section 60 of the Insolvency and Bankruptcy Code (IBC) are determined and limited by the provisions of Section 18(f)(vi) of the IBC. The exercise of power in question would be considered as part of the scope of the phrase “arising out of or concerning the insolvency resolution,” as outlined in Section 60(5)(c) of the IBC. This verdict of Union of India v. Kolkata Municipal Corporation is very important as it states how the exercise of power under Section 60(5) is limited and not be contrary to the provisions of Section 18(f)(vi) of the IBC.

In yet another case of Reliance Communication Limited v. Rajendra P. Bansal, it was ruled that the ongoing corporate insolvency resolution process may affect a wide range of matters that are currently pending before different judicial or quasi-judicial bodies. However, it should be noted that this does not mean that the issues being considered by these bodies solely arise from the insolvency of the company in question. The occurrence of insolvency can potentially lead to a legal claim, which falls within the authority of the National Company Law Tribunal (NCLT) as specified in Section 60(5). This case law limited the power and jurisdiction of the NCLT.

In the last case law of Insolvency & Bankruptcy Board of India v. SBI, which we will be analysing, it was held that An analysis of the provisions of the IBC reveals that the NCLT is the authoritative body responsible for making judgements under the IBC. The cases that can be adjudicated are listed in Section 60(5). The NCLT does not have the authority to handle the determination of the validity and constitutionality of the Regulations established under the IBC. As the NCLT is a product of the IBC, it does not have the authority to declare any provisions of the IBC or the Regulations as invalid or outside its legal power.

Conclusion

Through analysis of various case laws, although Section 60(5) appears to grant extensive powers, the Supreme Court in the cases of Embassy and Gujarat Urja has emphasised the inherent limitations of the NCLT’s authority. Nevertheless, it seems that the Supreme Court has not been made aware of certain crucial and significant clauses present in the IBC and the Companies Act, 2013. Consequently, it can be strongly argued that both judgements have limitations in terms of their extent and practicality. The Supreme Court would likely need another opportunity to address the remaining pertinent statutes to ascertain the scope of the NCLT’s authority under Section 60(5). It is possible that the legislature may choose to clarify the legal position by making an amendment. However, at now, there is still a significant uncertainty regarding the extent to which the NCLT can intervene through the provisions of Section 60(5), and this issue remains unsolved.