NCLT Lacks Jurisdiction To Recover Disputed Contractual Dues During Liquidation U/S 60(5) IBC: NCLAT New Delhi

Uttar Pradesh Rajkiya Nirman Nigam Ltd. (URNL) was working under the Uttar Pradesh Power Transport Corporation Ltd. (UPPTCL). URNL subcontracted the construction work of three power substations to Dev Denso Power Ltd. (Corporate Debtor).

After the liquidation order of the corporate debtor, the liquidator sought recovery of Rs 1.72 Cr from URNL and UPPTCL. The respondents refused to make the payment, and the liquidator approached the NCLT, seeking direction for payment of the said amount into the liquidation estate. The NCLT dismissed the application, observing that the disputed contractual claim falls outside its jurisdiction. Therefore, the liquidator has preferred the present appeal.

Contention of the Parties

The appellant contended that neither the outstanding debt amount was contested nor any contractual dispute was raised; therefore, the amount forms part of the liquidation estate.

It also contended that section 60(5)(c) of the IBC empowers the NCLT to adjudicate any question of law or fact arising out of or in relation to liquidation, including recovery of assets or receivables. It relied on the ruling of RKKR Steels Pvt. Ltd. vs. Surana Industries Ltd. in CA(AT)(Ins) No. 473 of 2020 and submitted that the liquidator is empowered to recover the outstanding dues.

Per contra, the respondent argued that the claims are not legally enforceable, as they remained uncrystallized and unadmitted. It highlighted the arbitration clause under the Letters of Intent and argued that the disputes had to be referred to arbitration.

Further, relying on the rulings of Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta (Civil Appeal No. 9241 of 2019), the respondent argued that the contractual dispute falls beyond NCLT's jurisdiction.

Observations of the NCLAT

The bench observed that the NCLT rightly observed that the jurisdiction under section 60(5) 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.”

The bench also observed that the matter cannot be referred to arbitration, especially when the corporate debtor is under liquidation proceedings. Doing so would be violative of the IBC frameworks.

Further, the bench observed that the invoices and certificates required under the clauses of the agreement were not produced. Also, the entry in the balance sheet does not create a legally enforceable liability. And without admission of debt or adjudication, the amount cannot be considered as part of the liquidation estate.

With the above observation, the bench concluded that the NCLT has rightly rejected the application, as the dispute was with regard to contractual dues and not related to either the insolvency or liquidation.

The bench lastly granted the liberty to the liquidator to seek relief through the appropriate legal forum.

Case Name: Pooja Bahry v. Uttar Pradesh Rajkiya Nirman Nigam Limited and Other

Case No.: Company Appeal (AT) (Insolvency) No. 1561 of 2023

Coram: Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member-Technical),

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 Date: 15.10.2025