Exclusive jurisdiction clause does not bar NCLT from entertaining IBC proceedings, NCLAT

The NCLAT has held that an agreement barring the filing of a suit or case between parties in India while vesting the jurisdiction with a foreign court does not oust the jurisdiction of the Adjudicating Authority i.e National Company Law Tribunal (NCLT) for proceedings under the Insolvency and Bankruptcy Code (IBC).

The order was passed by a three-member bench of Chairperson, Justice SJ Mukhopadhaya, Member (Judicial), Justice AIS Cheema and Member (Technical) Kanthi Narahari.

An application under Section 9 IBC was filed by Benteler Trading International GMBH, a German Company against the Corporate Debtor, Excel Metal Processors Private Limited for failing to make payment to the extent of US $1,258,219.42 inclusive of interest @ 15% per annum.

After the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench admitted the application, the Director of the Corporate Debtor, Imran Iqbal Khan moved an appeal before the NCLAT.

The Appellant argued that as per the agreement between the parties, any suit or case between them was maintainable only in the court at Germany and no case could be filed in any court in India.

Hence, it was argued that the NCLT has no power to entertain the application under Section 9.

Dismissing the contention, the NCLAT stated that insolvency proceedings did not amount to litigation or suit and were thus not hit by the agreement.

"..'Corporate Insolvency Resolution Process’/ insolvency proceedings is not a ‘suit’ or a ‘litigation’ or a ‘money claim’ for any litigation; No one is selling or buying the ‘Corporate Debtor’ a ‘Resolution Plan’; It is not an auction; it is not a recovery, which is an individual effort by the creditor to recover the dues through a process that had debtor and creditor on opposite sides; and it is not liquidation. The object is mere to get resolution brought about, so that the Company do not default on dues."

The NCLAT observed that pursuant to Section 408 of the Companies Act, 2013, the NCLT was constituted in different States to deal with matters within its territory.

It further stated that as per Section 60(1) IBC, the Adjudicating Authority in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors shall be the NCLT having territorial jurisdiction over the place where the registered office of the corporate person is located.

Since the Office of the corporate debtor was in Mumbai, the NCLAT held that the National Company Law Tribunal, Mumbai Bench had the jurisdiction to entertain an application under Section 9 and the Appellant could not derive advantage of the terms of the agreement reached between the parties.

The appeal was thus dismissed.

The Appellant was represented by Advocates Javeed Hussain, Ashish Rana.