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LIMITING THE JURISDICTION OF NCLT UNDER SECTION 60(5) OF

INSOLVENCY CODE: A JURISPRUDENTIAL TREND
Authored by:
Prarthana Gupta and Tanya Shukla
(Student at National Law Institute University Bhopal)

I. Introduction
The jurisdiction of NCLT is primarily provided under Section 60 (5) of the Insolvency Bankruptcy
Code, 2016 (hereinafter ‘Code’). It lays down a substantially wide ambit for the NCLT to exercise its
jurisdiction. Section 60 (5) says:

“60 (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.”[1]

Section 60(5)(a) stipulates that the NCLT has the authority to hear any application or proceeding
brought by or against a corporate person or corporate debtor. Any claims made for or against the
corporation, including its Indian subsidiaries, must also be lodged with the NCLT under clause (b).
Section 60(5)(c) grants NCLT residual jurisdiction. Even though residuary jurisdictions provide the
NCLT broad authority, its jurisdiction cannot conflict with the existing laws. Clause (c) stipulates that
insolvency-related cases will be filed with the NCLT. The Supreme Court considered the residuary
jurisdiction of the NCLT under Section 60 (5)(c) in the case of Essar Steel Ltd. v. Satish Kumar Gupta[2].
The precedent defined the provision as a residuary jurisdiction of the NCLT, which granted the
NCLT authority to adjudicate disputes arising from or related to the corporate debtor's insolvency
proceedings under the law.
NCLT has so far applied 60 (5) as a comprehensive remedy for all issues pertaining to a Corporate
Debtor undergoing CIRP or liquidation. Through the cases discussed below, the authors argue that
though the Court/Tribunal has acknowledged the limitations inherent to NCLT’s powers, several
concerns surrounding Section 60 (5) require further clarification.

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II. Scope and limitations of NCLT’s jurisdiction under Section 60(5) of IBC

Judicial interpretation of the powers under Section 60(5)

The legislative intent behind the introduction of the non-obstante clause in Section 60(5), as upheld
in the case of Arcelor Mittal[3], is to ensure that the NCLT alone has jurisdiction when it comes to
applications and proceedings by or against a corporate debtor covered by the Code, making it clear
that no other forum has jurisdiction to entertain or dispose of such applications or proceedings.
The residuary jurisdiction under the provision is wide enough to adjudicate questions of law or fact
arising from or in relation to the insolvency resolution proceedings. Further, if the jurisdiction of
NCLT were to be confined to actions prohibited by the imposition of moratorium under Section 14
of the IBC, there would have been no requirement for the legislature to enact Section 60(5)(c) of the
IBC.[4]
Though wide enough, NCLT’s residuary jurisdiction is nonetheless defined by the text of the IBC.
The NCLT cannot do what the IBC consciously did not provide it the power to do, and hence the
interpretation of the NCLT’s residuary jurisdiction must be done in a manner which comports with
the broader goals of the IBC. Holding this, the Supreme Court in Ebix Singapore Private Limited and
Ors. vs. Committee of Creditors of Educomp Solutions Limited and Ors.,[5] held that since the IBC
provides a 330 days outer-limit for the conclusion of CIRP, it would be antithetical to the purpose of
IBC to allow the Adjudicating Authority to use its plenary powers under Section 60(5)(c) to
potentially extend these timelines to enable the CoC to either issue a fresh RFRP if the Resolution
Plan is withdrawn by a successful Resolution Applicant or direct further negotiations with the
Resolution Applicant who is seeking a modification of the plan, whose failure could result in
withdrawal as well.
The Report of Bankruptcy Law Reforms Committee (‘BLRC’) Volume I: Rationale and Design –
November, 2015 (BLRC)[6] outlined its vision of the jurisdiction of NCLT vis-à-vis insolvency. It
referred to NCLT as the forum with jurisdiction over the winding up and liquidation of the
companies including original jurisdiction over all insolvency matters for maintaining sanctity and
efficiency. It further notes:
“The NCLT or DRT should also have jurisdiction to entertain and dispose of any pending or fresh suit
or legal proceeding by or against the debtor company or individual; question of priorities or any
other question, whether of law or facts, in relation to the liquidation or bankruptcy. By bringing all
litigations that may have a monetary impact on the economic value of debtor firm or individuals’
assets within the jurisdiction of the NCLT, the liquidation or bankruptcy process will be made
streamlined and efficient. However, proceedings before the Supreme Court or the High Court must
not be within the purview of this clause.”
In K.L. Jute Products Private Limited v. Tirupti Jute Industries Ltd. & Ors.[7], on the aspect of the Civil
Court’s jurisdiction, it was held that:
“Section 63 of the Code bars the jurisdiction of ‘Civil Court’ or an Authority to entertain any suit or
proceedings in respect of any matter over which the ‘NCLT’ or ‘NCLAT’ has necessary jurisdiction
under the Code. A cumulative reading of Section 63 of the Code and Section 430 of Companies Act,
2013 makes it clear that the ‘NCLT’ or ‘NCLAT’ have sole jurisdiction to determine the all issues
pertaining to the IBC.”

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III. Jurisprudential trend in underlining the scope of Section 60(5)

Test of ‘Nexus to Insolvency’

The Supreme Court also succinctly discussed the limit of the said provision in the case of Gujrat Urja
Vikas v. Amit Gupta & Ors.[8] The present case was regarding termination of certain contractual
services due to default in payment. The court, while dismissing the appeal, held that since the
termination of contract was solely on the ground of insolvency, the dispute at hand “arises out of
and relates to the insolvency of Corporate Debtor”.
The Court tried to interpret the words “arising out of” or “related to” under Section 60(5). In this
context, it referred to the judgment of the SC in Renusagar Power Co. Ltd. v. General Electric Co.[9]
where the words “arising out of” or “related to” in an arbitration clause, were interpreted to be “of
the widest amplitude and content”.
Further, the Court held that 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. The Court also issued
a note of caution to the NCLT and the NCLAT in this regard, holding that they must 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.[10] Therefore, it is established that
for adjudication of disputes that arise dehors the insolvency of the corporate debtor, the relevant
competent authority must be approached.
However, when the dispute to be adjudicated upon is dehors the insolvency proceedings, it falls out
of the ambit of the NCLT. This point was elaborated upon in the case of Tata Consultancy Services v.
Vishal Ghisulal Jain.[11] The question raised in this case was regarding the jurisdiction of NCLT to
decide upon the termination of a facilities agreement. It was alleged that the termination of the
agreement was motivated by the insolvency of the Corporate Debtor. While dismissing the appeal,
the court had opined that since complaints had been raised regarding the facilities agreement
repeatedly much before the initiation of CIRP, the contractual dispute was dehors the insolvency
proceedings and therefore outside the ambit of NCLT’s jurisdiction.[12]
Another exception to the jurisdiction of NCLT, as carved out in Embassy Property Developments[13], is
that of a decision taken by the government or a statutory authority in relation to a matter which is
in the realm of public law. Restricting the scope of jurisdiction in this regard, the Court ruled, “Let us
take for instance a case where a corporate debtor had suffered an order at the hands of the Income Tax
Appellate Tribunal, at the time of initiation of CIRP. If Section 60(5(c) of IBC is interpreted to include all
questions of law or facts under the sky, an Interim Resolution Professional/Resolution Professional will
then claim a right to challenge the order of the Income Tax Appellate Tribunal before the NCLT, instead
of moving a statutory appeal under Section 260A of the Income Tax Act,1961. Therefore, the jurisdiction
of the NCLT delineated in Section 60(5) cannot be stretched so far as to bring absurd results.”
In the case of Sangam India Ltd. v. Girjesh Kumar Dalmia[14], the NCLT Bench of Jaipur, applied its
“necessary jurisdiction” to grant relief in a dispute which prima facie was unrelated to the issue of
insolvency. In the aforementioned case, the respondent had been unlawfully occupying the
premises of the Corporate Debtor. The Resolution Professional approached the NCLT, seeking

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directions for eviction. Though a property dispute would be the sole jurisdiction of a civil court, the
NCLT invoked its “necessary jurisdiction” to justify its interference. The Tribunal concluded that
since the property in question was the sole property of the Corporate Debtor and non-action on
part of the Adjudicating Authority would lead to liquidation, its intervention in the matter is valid.
In another case[15] where a registered valuer challenged NCLAT’s decision to reduce the fee of the
Resolution Professional, the Supreme Court held that although the CIRP was set aside later, the
claim of the appellant as a registered valuer related to the period when he was discharging his
functions as a registered valuer appointed as an incident of the CIRP. Therefore, the NCLT is
empowered to determine the amount payable to the valuer as part of CIRP costs, in exercise of its
jurisdiction under Section 60 (5). Further, it held that “the availability of a grievance redressal
mechanism under the IBC against an insolvency professional does not divest NCLT of its jurisdiction under
Section 60(5) to consider the amount payable to the appellant.” Recognizing the overriding effect of IBC
under Section 238 of the Code, the Apex Court has also held that the existence of a clause for
referring the dispute between parties to arbitration does not oust the jurisdiction of the NCLT to
exercise its residuary powers under Section 60(5)(c) to adjudicate disputes relating to the insolvency
of the Corporate Debtor.[16]
Further, where the summons/orders issued by the Enforcement Directorate/Adjudicating Authority
/Appellate Authority under the PMLA were related to some investigation about the affairs of the
Corporate Debtor and its officers prior to the CIRP, it was held that it has no relation of whatsoever
nature about the insolvency of the Corporate Debtor or its liquidation process, and thus the
jurisdiction of NCLT under Section 60(5)(c) cannot be invoked in the case.[17]

IV. Comparative analysis of Section 60 (5) (a) and Section 60(5)(c)

Section 60 (5) states:
“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;”
Subclause (a) empowers the NCLT to adjudicate upon any proceeding or application against the
Corporate Debtor/person. It classifies NCLT’s jurisdiction on the basis of the party involved rather
than the subject matter of the application involved.
Even though, lexically, subclause (a) seems to provide a much broader ambit for the jurisdiction of
NCLT, the judicial trend so far has been to read it in regards with sub-clause (c). Limitations on the
exercise of subclause (a) were emphasised upon in the case of Suraksha Asset Reconstruction v.
Shailen Shah Resolution Professional of Wind World (India) Limited and Ors[18]. In the present case, the
court opined that before the NCLT can be empowered to entertain a third-party application against
the Corporate Debtor under Section 60 (5) (a), the party must be necessarily admitted for CIRP
under Section 7, 8 or 10 of the Code. That is to say, that the NCLT’s jurisdiction over the Corporate
Debtor begins only after he is admitted to CIRP and is thus already covered under the ambit of
Section 60 (5) (c). Therefore, to dispose of such applications the only option is to do the quasi-judicial
determination u/s 60(5)(a) of application or proceeding initiated u/s 7, 9 and 10 of IBC, 2016 to assume
valid jurisdiction u/s 60(5)(c).[19]

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An argument may be made for a more expansive interpretation of subclause (a) and its application.
As previously established, subclause (a) specifies that the NCLT has the authority to rule on any
application by or against the corporate debtor. It plainly grants the NCLT expansive authority, which
is opposed in clause (c). If section 60(5)(a) were considered, the NCLT would have jurisdiction over
both matters. Nevertheless, there was no mention of this in the verdict. Additionally, according to
Section 424 of the Companies Act of 2013, the NCLT or NCLAT has the same civil court powers as
the CPC of 1908. In light of this, the powers of the NCLT under Section 60(5) could be substantially
broader than those envisioned in the Embassy and Gujarat Urja cases.
Nevertheless, the invocation of sub-clause (a) has remained minimal since the ambit of its
application essentially remains curtailed by sub-clause (c). This raises doubt as to the legislative
intent to include sub-clause (a) in the first instance. A wider interpretation would make matters
complicated since it would result in a floodgate of litigation against the corporate Debtor that has
no bearing with the insolvency proceedings. Conversely, the imposition of moratorium in
accordance with section 14 implies that any proceeding against the Corporate Debtor adhors the
insolvency cannot be initiated.
Thereafter, if NCLT’s jurisdiction is set to begin only after commencement of CIRP and it to be
limited to matters arising in and out of insolvency, the inclusion of subclause (a), allowing for
initiation of “any proceeding” against the Corporate person/debtor, is absurd. The powers under
sub clause (a) cannot extend to the extent of including any civil proceedings barred by the
imposition of moratorium. In the case of Jakson ltd. and Ors. v. Three C Universal Developers[20], the
Tribunal had held that upon imposition of moratorium, a blanket restriction is enforced upon civil
suits against the Corporate Debtor. Not even proceedings under Section 241-242 of the Companies
Act, 2013 can stand as an exception to it. The respondents in this case had relied on subclause (a) to
invoke the Tribunal’s jurisdiction. However, this contention was rejected by the court stating that in
no case can a civil proceeding stand as an exception to the bar imposed by the moratorium thereby
implying that Section 60(5)(a) cannot be widened to include civil proceedings instituted against the
Corporate Debtor.

V. Conclusion
While the text of Section 60(5) of IBC indicates a power of the widest nature granted to NCLT, the
jurisprudential analysis in deciding on applications under the provision highlights that Courts have
been mindful to constrain NCLT’s jurisdiction to the extent of issues arising solely out of the
insolvency. While it is true that the intent of the provision is to give NCLT alone the jurisdiction to
entertain applications by and against the Corporate Debtor, it has been recognized that this would
not mean to give the Tribunal jurisdiction to entertain all questions of law and facts under the sky.
However, while the test of nexus to insolvency as laid down by the Supreme Court limits the scope
of the provision to some extent, a clearer authority on the same giving directions as to the ambit of
the scope of jurisdiction is still awaited.

Reference:
[1] Insolvency and Bankruptcy Code, 2016 Section 60 (5).

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[2] Committee of Creditors of Essar Steel India Limited vs Satish Kumar Gupta, [2019] ibclaw.in 07
SC.
[3] Arcelormittal India Pvt. Ltd. v. Satish Kumar Gupta, [2018] ibclaw.in 31 SC.
[4] Gujarat Urja Vikas Nigam Limited v. Amit Gupta and Ors., (2021) ibclaw.in 44 SC.
[5] Ebix Singapore Private Limited and Ors. v. Committee of Creditors of Educomp Solutions Limited
and Ors., (2021) ibclaw.in 153 SC.
[6] Available at https://ibbi.gov.in/BLRCReportVol1_04112015.pdf.
[7] K.L. Jute Products Private Limited v. Tirupti Jute Industries Ltd. and Ors., [2020] ibclaw.in 168
NCLAT.
[8] Supra at 4.
[9] Renusagar Power Co. Ltd. v. General Electric Co., (1984) 4 SCC 679.
[10] Para 67, Gujarat Urja
[11] Tata Consultancy Services v. Vishal Ghisulal Jain, (2021) ibclaw.in 167 SC.
[12] Ibid para 27.
[13] M/s Embassy Property Developments Pvt. Ltd. v. State of Karnataka & Ors., [2020] ibclaw.in 12
SC.
[14] Sangam India Ltd. v. Girjesh Kumar Dalmia, IA (IBC) No. 333/JPR/2021.
[15] Alok Kaushik v. Bhuvaneshwari Ramanathan and Ors., (2021) ibclaw.in 90 SC.
[16] Supra at 10 para 21.
[17] Dushyant Dave Liquidator for Siddhi Vinayak v. Siddhi Vinayak Logistic ltd. (NCLT Ahmedabad),
(2022) ibclaw.in 686 NCLT.
[18] Suraksha Asset Reconstruction v. Shailen Shah Resolution Professional of Wind World (India)
Limited and Ors., [2020] ibclaw.in 97 NCLT.
[19] Ibid para 86.
[20] Jakson ltd. and Ors. v. Three C Universal Developers, 104 (IB)-894 (ND) 2019 (2019) ibclaw.in 119
NCLT.

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