Page 94 - DTPA Journal December 21

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Nov. - Dec., 2021

FATE OF CONTRACTUAL AGREEMENT

UNDER IBC : SUPREME COURT

CA Binay Kumar Singhania
Insolvency Professional

Tata Consultancy Services Pvt Limited made pursuance to start of insolvency and proper
(Appellant) entered into aagreement with SK mails from time to time were given to CD. The
st
Wheels Pvt Ltd (CD)on 1 December, 2016 deficiency were notified even prior to start of
whereby CD had to provide premises with certain insolvency. It was also mentioned that
specifications and facilities to the appellant for moratorium is applicable on provision of goods
conducting examinations for educational and supplied to CD. Whereas in the instant case
institutions. Agreement contained a clause of the provision of goods and services are used by
termination with immediate effect in case material appellant and not CD. Appellant also stated that
deficiencies are not rectified within 30 days. third party has a legal right of termination even
after start of insolvency.
Appellant wrote mails to CD for deficiency in
services on several occasions before start of Hon'ble Supreme Court heard the matter and
th
insolvency. Insolvency was admitted on 29 concluded that third party right can not be done
March, 2019. Thereafter again appellant wrote away with. The notice period of 30 days is not
mails for deficiency and on 10 june, 2019 required as regular notices for deficiencies in
terminated the agreement. Resolution Professional services were given to CD even prior to
(RP) approached NCLT vide misc application u/s insolvency. The termination of agreement will not
60(5) citing moratorium and also mentioned that bring corporate death of CD as this agreement was
30 days notice period was also not given to CD. not the sole source of revenue for CD. Apex court
rd
pronounced the order on 23 November, 2021 in
NCLT heard the matter and opined that termination
favour of Appellant and cautioned NCLT and
of agreement will have effect on insolvency
NCLAT regarding interference with a party's
process and moratorium is applicable after
contractual right to terminate a contract. Even if
admission to insolvency. It further noted that 30
the contractual dispute arises in relation to the
days notice was also not given and stayed the
insolvency, a party can be restrained from
termination on 18/12/2019. Appellant approached
terminating the contract only if it is central to the
appellate tribunal (NCLAT ) whereby NCLAT also
success of the Corporate insolvency resolution
upheld the order of NCLT on 24/06/2020 and
process. The jurisdiction of NCLT under Section
termination of agreement continued to be stayed.
60(5)(c) of IBC cannot be invoked in matters
Appellant thereafter approached Hon'ble Supreme where a termination may take place on grounds
Court and placed the fact that termination was not unrelated to the insolvency of the CD.

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