Challenges in corporate insolvency, particularly when dealing with contract terminations and arbitration proceedings

2024 (1) TMI 460 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI

This case involves CA Rajeev Bansal, the liquidator of Isolux Corsan India Engineering & Construction Pvt. Ltd., and SOMA-Indus Varanasi Aurangabad Tollway Pvt. Ltd. (formerly SOMA Isolux Varanasi Aurangabad Tollway Pvt. Ltd.).

Key Points of the Case:

1. Background: The case arises from a dispute between Isolux Corsan India Engineering & Construction Pvt. Ltd. (the Corporate Debtor) and SOMA-Indus Varanasi Aurangabad Tollway Pvt. Ltd. (the Concessionaire). The Concessionaire terminated an agreement with the Corporate Debtor and invoked bank guarantees.
2. Insolvency Proceedings: Following this, a Corporate Insolvency Resolution Process was initiated against the Corporate Debtor.
3. Claims by the Liquidator: The Liquidator, Rajeev Bansal, made a substantial claim against the Concessionaire for additional costs due to changes in the scope of work, price variation, and delays.
4. Application for Arbitration: The Liquidator sought approval to initiate arbitration proceedings against the Concessionaire regarding the NH-2 Project.
5. Deletion of the Respondent: The National Company Law Tribunal (NCLT) Chandigarh Bench passed an order deleting the Concessionaire from the array of parties in an application under Section 66 of the Insolvency and Bankruptcy Code. This was challenged by the Liquidator in the appellate tribunal.

The document outlines the arguments presented by both parties:

• The Liquidator argued that the invocation of bank guarantees by the Concessionaire was wrongful and fraudulent.
• The Concessionaire contended that since the Liquidator had already sought to initiate arbitration proceedings, there was no need for concurrent proceedings under Section 66.

Judgment: The Appellate Tribunal, after reviewing the submissions and the record, observed:

• The claims against the Concessionaire, including those for wrongful invocation of bank guarantees, were already included in the arbitration proceedings.
• The Tribunal found no error in the NCLT’s decision to delete the Concessionaire from the Section 66 application.
• However, it granted the Liquidator the liberty to file a fresh application under Section 66 if future arbitration proceedings revealed facts that necessitated such action.

The Tribunal dismissed the appeal, but with the provision that the Liquidator could file a fresh application under certain circumstances.

Article Title Suggestion: "Analysis of CA Rajeev Bansal's Appeal in Isolux Corsan Case: Navigating Legal Complexities in Corporate Insolvency"

This case highlights the intricate legal challenges in corporate insolvency, particularly when dealing with contract terminations and arbitration proceedings. The Tribunal's decision underscores the importance of streamlined legal proceedings and the careful consideration of concurrent legal actions in insolvency cases.

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2024 (1) TMI 460 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI